TL;DR
Partner incentives only create value when they’re aligned to business goals, visible to partners, and easy to participate in. Yet only 50% of vendors can prove ROI, and just 12% report partner participation above 75%.
The programs that outperform don’t necessarily pay more. They make incentives measurable, automated, and embedded throughout the partner journey. Incentives should change behavior, not just reward outcomes.
Background to this eBook
Back in Q1, Channelscaler hosted a webinar on partner incentivization strategies. “Navigating the Right Incentive for the Right Partner Type” discussed:
- The key market trends impacting how vendors incentivize their partners in 2024
- Types of incentive programs and applicable use cases
- Who best to incentivize – the individual, the partner company, or both
- Building the business case for incentives
- Measuring incentive programs – success metrics & ROI
Here’s a round-up of the webinar highlights plus key audience insights from the polls of 50+ vendor companies in the audience. We’ve compared the responses to data from previous years to identify any key changes and trends.
Meet the Panel
What’s happening with partner incentives in 2024?
1. Why are incentives so critical right now? How do you best align partner and vendor incentive goals to ensure mutual success?
2. What types of incentives are popular? Which types of incentives work well in what scenarios? How do you innovate to stand out?
3. Who best to incentivize, the individual, the partner company, or both? How can incentives be tailored to motivate sales teams, marketing, pre-sales, and technical teams?
4. When do you incentivize? Exclusively for closed deals or throughout the entire sales journey, from deal registration to demo, proof of concept (POC), and close.
5. How do you run it efficiently? What role can automation play? How do you measure ROI?
5 key trends impacting partner incentive strategies in 2024
The channel has transformed significantly over the last decade. It’s become a more complex, interconnected ecosystem, causing new partner types and routes to market to emerge, such as cloud marketplaces.” – the rewrite has changed the original meaning of this sentence, and it is no longer correct. Suggested change. It’s become a more complex, interconnected ecosystem. Not only are there new types of partners, there are also new routes to market, such as cloud marketplaces. Now, older technology is not always fit for purpose, and vendors may need to rethink how they now incentivize partners.
1. Partner business models: With the ecosystem evolving, partners are diversifying their business models. Incentives must adapt to these new motivations and revenue streams.
2. Longer sales cycles: Decision-making now involves multiple customer stakeholders, resulting in longer sales cycles. Incentives need to accommodate these extended timelines.
3. Customer lifecycle focus: Acquiring net new customers is more challenging in the current economy. As a result, incentives are expanding to cover all stages of the customer journey, including renewal, cross-selling, and attach rates / upsell.
4. Increased partner-sourced incentives: Recognizing the difficulty in acquiring new business, companies are offering more attractive incentives for net-new logos and partner-sourced deals and referrals.
5. Alignment with company goals: With performance and ROI under greater scrutiny, it’s crucial to ensure that incentives support overarching business objectives. Incentives should motivate indirect channels to work towards the same strategic outcomes as direct sales.
“Incentives play a key role in creating competitive advantage and making sure partners gravitate towards your solution instead of making other choices.”
Kenneth Fox
CEO
Channelscaler
Business leaders often see indirect channels as a cost-effective and less risky route to market compared to building direct sales teams. In today’s economy, there is therefore an even greater interest in partnering.
Consequently, channel leaders are under even greater pressure to grow partner revenue. And the most popular way to do that? Incentives.
Why do partner incentives matter?
Incentives are important for motivating, building loyalty, winning partner mindshare, driving behavior, and increasing revenue with partners.
But, for incentive programs to be effective, they must align closely with your overarching business goals otherwise it’s difficult to prove ROI.
In today’s economy, such misalignment can have severe consequences. Failing to showcase a return on investment puts your channel incentive budget at risk of reduction or even cancellation altogether.
So, it is concerning that only half of vendors are currently seeing a return on investment from their incentive programs.
“If a partner is not aware of what they are being paid out for or if they don’t know what action they took that is being incentivized, you have missed an opportunity. Having something built and the process already organized to claim that incentive or rebate makes all the difference.”
Alli Oneal
Sr. Manager of Global Partner Programs,
Barracuda
“Partner engagement will ultimately determine whether your incentive program is a success or a failure. The main reason for low engagement is a lack of automation. Because partners just don’t know that you have an incentive program if it’s after the fact. With automation, we typically see participation rates exceed 75%.”
Kenneth Fox
CEO
Channelscaler
What types of partner incentives are popular?
Many vendors offer a mix of different types of incentives. Rebates are the most popular, closely followed by SPIFFs (Sales Performance Incentive Funds.) Choosing the right incentive type depends on whether you’re aiming for short or long-term goals.
SPIFFs are great for driving a quick boost in sales or encouraging specific activities like training. However, rebates are more effective for longer-term goals like hitting growth targets.
Digital transformation has resulted in a variety of new types of companies influencing customer decisions, these include (but are not limited to) managed service providers (MSPs), independent consultants, consulting and professional services firms, industry specialists, social media influencers, and even developers.
Therefore, referral and influence incentives are gaining traction. With the rise of as-a-service models, many vendors have partners who may not directly transact with them but are engaging with their customers. Offering referral incentives motivates these partners to refer opportunities to the vendor.
While only 14% of companies currently offer influence incentives to partners, this has significantly increased from 2023 (6%). This trend will continue in 2024 and beyond.
Beyond the type of incentive offered, it’s also important to consider the global or regional scope of an incentive program. Different markets have distinct legal, tax, and cultural factors that impact incentive effectiveness. So, it is not surprising that most companies offer a mix of global and regional incentives.
Run global, think local
“Often what works in one region doesn’t work in another. When you are running a global program, you really do need to think locally.”
Kenneth Fox
CEO,
Channelscaler
Targeted incentives drive strategy
“Instead of only giving a rebate “based on sales out, think about the market that you’re trying to drive. Is there a special capability that you’re trying to achieve? Or a market space? While you may be incentivizing partners on sales out, there are other types of incentives that you can reward them on to drive specific KPI behaviors.”
Laura Evans
Head of Global Channel Incentives & Distribution,
HP
Who should you incentivize?
Partner business models are changing. Partners have different needs and ways of making money, so it’s important to rethink how you reward them.
With sales cycles becoming longer and involving more stakeholders, ensuring your incentives match the effort is essential. Whether you reward the entire company or individual reps, it’s about recognizing the work they put into closing deals.
It is also important to recognize the influence of technical and pre-sales roles. As a result, many vendors are now extending incentives to include pre-sales and solution engineers.
While some vendors believe you can’t incentivize individuals due to tax or other reasons, this is a misconception. Many companies offer individual incentives, but it’s important to have a systematic approach to overcome some of the inherent complexity. Flexibility is key, allowing you to effectively accommodate different partner’s preferences.
“These hybrid partners, do more than just resell, they do more than just services. This also means that we need to think of different ways to incentivize them.”
Alli Oneal
Sr. Manager of Global Partner Programs,
Barracuda
“We reward companies and let them be the administrator of how they want to disperse it. We’re giving the flexibility to the company to decide what best works for their business. We have to be respectful on how they choose to go-to- market with their own sales strategy. We need to make sure that we’re complementing it.”
Laura Evans
Head of Global Channel Incentives &,
HP
“Companies doing well in the channel are incentivizing the people behind the salesperson. Incentivizing the technical team for a demo or proof-of-concept, because they’re the ones that put it all together. If they didn’t, the salesperson wouldn’t lead with your solution.”
Kenneth Fox
CEO,
Channelscaler
When should you incentivize?
When it comes to incentivizing partners, timing is everything. It’s not just about deciding on the incentives, it’s about giving partners the time and resources to integrate them effectively into their sales cycles.
It’s also not just about rewarding closed deal – you need to recognize the efforts partners put in throughout the entire sales journey. From deal registration to demos, proof of concepts (POCs), and finally, closing the deal, each stage presents an opportunity to motivate and engage partners.
Many vendors are expanding their incentive programs beyond traditional metrics like deal registration and deal closure. They’re now rewarding partners for activities such as renewals, cross-selling, and upselling.
“How do we incentivize them across all stages of the customer lifecycle? Not just deal registration, or closing the business, but also on retaining a renewal, cross-selling or adopting other solutions or services.”
Alli Oneal
Sr. Manager of Global Partner Programs, Barracuda
“We often see companies incentivizing onboarding – i.e., for the partner to complete everything from their T&Cs to their first registered deal and closed opportunity. The other extreme is for very mature partners. You can incentivize your top partners to grow but in a different way to those that are just coming aboard.”
Kenneth Fox
CEO,
Channelscaler
Another factor to consider is partner maturity. Effective incentive timing and program design are critical to achieving desired results. Whether paying out incentives upfront or at the end of the quarter, it’s important to carefully weigh up your options and tailor programs to suit the maturity and unique needs of your partners and markets.
How to run an effective incentive program
Automation.
Automation.
Automation.
(Did we say automation?)
The biggest challenge faced by vendors running incentive programs is a lack of visibility of performance and ROI (41%), closely followed by the time-consuming and resource-intensive nature of managing these programs (35%).
Automation provides a solution to both of these challenges.
With automation, you can easily configure and manage multiple types of rebate programs, allowing you to:
1. Monitor the success of your incentive program in real-time. This enables you to measure results, partner engagement levels, and overall performance. It also allows for flexibility in making any adjustments mid-flight rather than after the program has ended.
2. Track partner performance in real-time. Provide visibility to partners and account managers regarding their progress, potential earnings, and proximity to targets and giving them greater transparency in calculations.
3. Utilize visualization tools for motivation. Visual representations of incentive performance serve as motivation for both partners and your account managers. Vendor Dashboards offer immediate insights into rebate program performance, calculations, and claim request statuses, while Partner Dashboards make it easier for partners to track their performance and claims.
4. Simplify the claiming process. Automation streamlines claim submissions by notifying partners of qualified rebates and incentives once the incentive period has closed. Partners should be able to submit claims via a one-click process easily.
5. Expedite partner payments. Automating claims payout through a payment engine ensures partners receive faster, timely incentive payments.
Performance insights = empowered partners
“Show them week-by-week how they are performing against target. That really changes the whole go- to-market motion. Your partners now see how they’re doing and what they could achieve by selling more. Of course you could pay out more, but it is a win-win as you’re paying out more on more sales.”
Kenneth Fox
CEO,
Channelscaler
Automation =
ease of doing business
“By leveraging the tools that Channelscaler has, we found that we were able to give time back to our partners as we were doing the tracking on their behalf.”
Laura Evans
Head of Global Channel Incentives & Distribution,
HP
Final Words of Advice
“You’re one of many vendors that your partners are dealing with, so make sure its measurable and simple enough so they can understand what their goal
objectives are and go execute.”
Laura Evans
HP
“Make sure it’s mapped to your organization’s goals and your partner’s goals, so that they understand what the specific measurable aspects are.”
Alli Oneal
Barracuda
“Be easy to work with. A partner needs to be able to log in and see what they’ve earned against a rebate. Then make a claim via a one- click process. The same goes for SPIFFs.”
Kenneth Fox
Channelscaler
