Cultivating partner loyalty during the ongoing business model transformation from a transactional model to a recurring revenue model is a complex, multifaceted endeavor that warrants a new vision, as this transformation continues to disrupt existing channel financial and incentive models, impacting every level of the channel ecosystem.
Leading manufacturing companies often drive increased sales by financially rewarding the performance of their channel partners with rebates and incentives programs. Yet, incentive program designers must incorporate new approaches to partner engagement and incentives to be effective in this new model.
Loyalty360 caught up with Claudio Ayub, chief strategy officer for Perks, to learn more about this intriguing topic of rebates and customer loyalty.
Can you talk about the current state of rebates as you see it, and its potential impact on customer loyalty strategies?
Ayub: Let’s start with a basic fact in today’s world of “alternative facts”. Rebates are still a powerful motivator for channel partners, as it is estimated that vendors spent over $70B on channel incentives in 2016. Rebates are a significant portion of this spend, and there is no reason to believe that this volume of rebates will see a decline anytime soon.
It is important to note, however, that a partner rebate program is just one of many components that engender partner loyalty. A holistic approach to building partner loyalty must also include the strength of the brand, solution innovation, breadth of portfolio, quality of support and enablement. And finally, what channel partners care most about is ease of doing business.
What are some of the keys in creating an incentives strategy that consolidates rebates and rewards with the ultimate goal being alignment of stakeholders in their earning and redemption opportunities?
Ayub: Building loyalty while the industry is transforming, from a transactional model to a subscription model, definitively requires a new method of incenting partners and their teams. Leading manufacturers are moving away from rewarding partners solely for finish-line results. Instead, they are rewarding desired actions taken at sales cycle stages where a change in partner behavior is desired.
The key to an incentive strategy that consolidated individual and company level incentives is to compare incentive business goals as well as the specific activities and behaviors that organizational and individual rewards seek to encourage. Incentives must reinforce, rather than conflict, with one another to maximize adoption, efficiency, and impact.
In this new business model, you must provide a mix of individual, team, and company level rewards to motivate your partners and their teams to go through the transformation. You can achieve this by combining company-level (rebates) and individual/team level (rewards) into a single incentives program built around solution selling.
A unified approach to incentives improves the effectiveness of complex solution selling while reducing operational costs and improving overall program effectiveness.
Why are rebates a powerful motivator for channel partners?
Ayub: Rebates are one of the most powerful motivations for channel partners because they are directly tied to partner profitability. For the most part, rebates go directly to the partner’s bottom-line. However, different partner types have a distinct business model and require different incentives. Channel leaders who develop a blend of incentives aligned to their partners’ go-to-market strategy are best able to engage them successfully.
For example, volume resellers are motivated by incentives that reward growth in volume and revenue and penetrate existing corporate accounts. Incentives for sales that are time-based and aligned to their shorter sales cycle extend mindshare across the sales organization.
What are brands doing well in this area and where do the challenges lie?
Ayub: Some of the top performing rebate programs in the channel today come from HPE, Cisco, Lenovo, and Dell–to name a few. One of the biggest challenges in rebate program management is POS data management. Unfortunately, we still see many manufacturers collecting sales transactions, inventory, claims, receipts, and returns data from partners everywhere, and then picking through the pile by hand, matching SKU for SKU, catching incorrect files and duplicate transactions. This practice is asking for an endless string of errors, which will negatively impact the partner experience.
The best practice here is to start by looking at POS data, program goals, eligibility rules, payment rules, and even claims! To then run them through a calculation engine that crunches these numbers and delivers a simplified partner experience where all the partner sees are targets against goals updates in real time. That’s the result when you integrate channel POS data to your rebate program; when done right, this integration can build a dependable foundation for all your business decisions, and equally important build a strong foundation for a consistent partner experience. Integrating channel data will substantially improve your users’ experience and reduce costs. Aggregating, cleansing, and enriching your partner data will ensure you deliver incentives and provide dynamic transactional incentives without a complex claiming processes.
What do you foresee as far as trends in this area in 2017 and beyond?
Ayub: Top performing manufacturers are moving away from revenue attainment or base rebates only, and adding Growth targets with different benefits between 100 percent of target and 120 percent of target. They are also adding another layer for services attached, for example, and other layers for Net New LOB and Net New Logo. These layers may be defined as Business growth: rebate payments focused on creating net new business, rather than repeat orders with existing customers−New market penetration; focused on creating new business in designated vertical markets (average 3 to 6 percent of sales)−New customers; payouts based on achieving revenue goals with net new customers (average 5 to 8 percent of sales)−Adding value: achieving attach rate goals for services (i.e. a target percentage of services sold or services revenue goal)