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Structuring Your Channel Sales or Distributor Incentive Program

If your parents were like most, they were constantly offering incentives in an effort to make you cooperate or work harder. Maybe it was receiving a cash allowance, or you could have been rewarded with your favorite dessert for doing well in school. Whatever the, parents are always great at offering and giving incentives to their children because they know what makes them happy.

Companies that offer incentive reward programs work in the same manner. In today’s business world, leaders of larger corporations and companies simply do not have the time to create a rewards program that will specifically benefit their employees. By hiring an incentive management company such as Loyaltyworks to design an incentive program for them, the opportunity to improve work performance among employees is much greater.  If done incorrectly, however, it can complicate the effectiveness of any company rewards program.

To ensure your incentive program is meeting the correct standards, several basic requirements should be addressed.

Your Objectives:

When creating any incentives program, it is important to be completely aware of the purpose it intends to serve. Having specific objectives in mind will help form the basic structure of the program. Typically, naming one primary objective with one or two smaller objectives will help to achieve your goal more efficiently. A beneficial primary objective will identify the overall goal you want to achieve, and sometimes more specifically with numeric terms. An example of how this would look might be: Increase company sales by 15 percent in the second quarter in comparison to last year’s second quarter. Taking measures to simply develop and write down your company’s objectives and goals may be the key to successfully achieving them.


Find The Best Match – Companies who sell through middlemen must define the type of specific agents, dealers, or distributors you believe will reap the most success. With only few of your retailers 20% of your dealers represented the bulk of your business, it is important to a few retailers now comprising the large majority of the market share, it has made it difficult to target the individual representatives of these corporations. Make an effort to specifically target in an incentive reward program. This could mean greater success as a whole.

Grabbing Their Attention – It may be a harsh reality, but it is important to understand that your channel partners are generally not going to go out of their way to sell your product. Large retailers have wide variety of products to sell, so they do not have time to pay special attention to yours. Competing with other companies for the attention of your dealers will always be necessary, but there are ways to stand out among the fierce competition. With a strong, well-developed employee reward program, your dealer partners will likely be inclined to remain loyal to you and your product.

Invite top dealers, agents, and distributors to an all-expenses-paid meeting and allow them to express any of their special needs or concerns. Not only will this show your consideration for their needs, it will also help identify what incentives would be beneficial to offer. Not to mention, who doesn’t want a nice little vacation/ relay that to your board.

The Structure: Keep It Simple:

The easiest way to improve your incentives program and increase employee motivation is by keeping its structure simple. Doing so will result in a significant performance increase from the top dealers of your company. Several options and guidelines for reward and recognition programs are listed below:[ezcol_1half]

  • Open-Ended Strategy – Encourage dealers to sell more by setting the bar higher than last year’s sales quota. Also, tie basic training and communications into the program to make participants more effective. This strategy is flexible and easy to budget.
  • Closed-Ended Strategy – Reward the top performers of the company with recognition and rewards. This can sometimes backfire however, since these performers would typically excel anyway.
  • New Product Introduction – For new products, budget a specific amount per unit to go towards an incentive program that will increase loyalty from dealers or distributors. Providing an exciting program is essential for this strategy to work properly.
  • Plateau Programs – Instead of designing a sales incentive program that aims to increase sales overall, offer rewards that will vary depending on how much their sales performances have increased.
  • Cooperative Marketing Program – To increase loyalty and excitement about promoting your product, offer rewards for employees willing to participate in co-op marketing programs.
  • Specific Products – Distributors may be more inclined to sell your specific product if you offer rewards for selling or buying more of a product. Use this program with caution, however. By singling out a specific product, you might risk lowering sales of other products.
  • Database Programs – For companies that use co-op direct marketing with their customers, consider rewarding dealers for providing names and telephone numbers.
  • Training for Salespeople – Instead of offering monetary or material rewards, offer credits to so participants can receive training in a specific area. This will not only create an incentive for the salespeople, but will improve their caliber and work-ethic.
  • Sales Pushers – If your company is seasonal, or experiences a period of slower sales, offer more incentives during these times.

What’s Your Award System?

After solidifying which objectives you would like to tackle, it is a good idea to decide how to reward your audience. Types of rewards can often vary, depending on what goals you are planning to propose. Realistically, many employees will not be interested in non-cash rewards. Because monetary rewards are generally standard, your company should look at what competitors are offering to determine what the best approach should be.

  • Create a Realistic Budget:

If it is structured correctly, any employee incentive and rewards program can fall well within the parameters of the company budget. Choosing  low cost for fixed items such as administration, communications, and tracking will ensure your program is affordable.

When deciding what type of employee rewards to offer, it is important to allow for flexibility in case performance exceeds quotas or goals.

  • Who’s in Charge?

Perhaps the most important aspect to consider when creating an incentives program is who will be running it. Any successful rewards program has a specific person appointed to make sure things run smoothly. Crucial areas to focus on include goal tracking, administration, communications, and can include award fulfillment, however the best incentive providers now automate these processes.

  • Write the Rules:

Along with the basic structure of an employee incentive plan, a set of rules should be set in place. Much like the incentive program itself, this set of rules should be simple and easy to understand. Most employees will not be willing to sit down to flip through a stack of papers, no matter what their interest level is.

More specifically, the rules of the program should include, but are not limited to, the conditions for participation.  Allow several people to read over them, making sure it is simple and easy to understand.

  • Communications:

Fast and easy communication is another benefit that stems from a simple structured incentive program. A program that is too cluttered with information will find it difficult to attract the attention of the key audience. In order to help participants find and consider your program, provide them with an enrollment kit. Think of this kit as a welcome basket of muffins you might send to a new neighbor. Include your business address, tax identification numbers, and should specifically show the duration of your program.

Use business presentations and meetings to announce your program as well. Hold regional meetings frequently, and make sure to mention the program in the presentation, while dealers and distributors are present.

  • Time to Launch:

After reviewing your incentive program until your eyes are about to fall out, it is time to schedule a release date. Once a formal start date has been decided, it is important to stick with it.

Once the program has officially begun, it is critical to track and record the progress. Record results on a month-to-month basis, and compare to previous entries. Although major rules of the program should not be altered, small adjustments can still be made throughout the lifetime of your sales incentive program.

  • Wrapping Up:

When the official program period is concluded, work quickly to generate the final results. Employees have placed time and effort into this program, so naturally they will be anxious to see how they performed. In fairness to their hard work, recipients of the awards should be notified as soon as possible.

In cohesion with monetary rewards, employee performance can also be improved by public recognition. To demonstrate your appreciation for their participation, consider presenting a leaderboard to showcase who adds the most $$ to your bottom line. For those in the lead, it will not only boost their confidence, but will also justify all the hard work they did. On the contrary, those watching from the bottom may find themselves increasingly motivated to perform better, and work harder.

  • Evaluation:

Carefully study the results of your employee rewards program. Take note of which areas you were successful, and which areas could use a bit of improvement. No matter how carefully an incentive program is designed, there is always room for improvement.