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Make Partner Incentive Programs Pay

Communications and high-tech companies rely heavily on incentives, promotions, rebates, and other pricing mechanisms to shape demand, drive channel partner loyalty, and gain market share. Creating these plans is fairly easy. However, measuring and interpreting incentive performance is a whole different ballgame.

Few companies own all of the tools or examine all the metrics necessary to quantitatively and repeatedly measure the success of an incentives program. Without knowing the parameters of an incentive and collecting a broad measure of its impact and performance, organizations can't determine their incentive program's true return on investment. To get a comprehensive sense of your incentives' impact, employ three traditional metric approaches as well as one approach that looks beyond the typical markers of success.

Traditional approaches to measuring incentive performance include a combination of the following:

  1. Activity-based metrics: These metrics look for program activity, such as number of claims submitted, number of partners who opted into the incentive program, total volume of incentive claims submitted, and so on.
  2. Efficiency-based metrics: Efficiency metrics look at how well the company performed in terms of executing the incentive. Many well-designed incentives never deliver on their promise due to poor execution in terms of time to respond to claims, total time from submission to payout, number of escalations, amount accrued, and unclaimed funds.
  3. Performance-based metrics: While these metrics are the most difficult to measure, some basic performance numbers can be collected, including total number of leads generated, cost per inquiry or lead, total program cost, and more. Isolating the incremental revenue generated outside of all other activities (and market behavior) takes advanced financial modeling that is too difficult, costly, and time-consuming for most organizations.

However, there is one more category that should be considered: supply chain metrics. This metric takes a slightly different spin on the efficiency metrics, in that it looks at the impact of the incentive on both the demand and supply plans. Did the incentive create demand in the expected area or in a different area? Did it create unanticipated inventory buildup? Did your organization incur any operational-related costs that were not part of the initial plan? In calculating the truly burdened cost of an incentive program, many marketing and sales executives fail to account for supply chain-related costs, some of which can dramatically shift an incentive from being a winner to a dud.

Unfortunately, most organizations lack the integrated systems and closed loop processes necessary to create, execute, validate, and analyze incentives in a consistent and quantitative manner. Incentives are often created in one department, executed in another, and analyzed and reported by a third. Worse yet, this silo-based approach is often supported by nothing more than dated spreadsheet-based models that lack the scalability, control, and accuracy to help most organizations.

Instead, best-in-class companies implement a true incentive and revenue management platform that can quickly and accurately collect all incentive-related activity, and reconcile the results against the original offer and deal terms, as well as constraints and forecasts. In this way, these organizations can capture incentive metrics in a consistent manner and use them as the foundation for the creation of future deals, offers, and incentives.

9 comments on “Make Partner Incentive Programs Pay

  1. Hailey Lynne McKeefry
    September 23, 2013

    I'd be interested in knowing, Michael, whether you thought that people tend to over estimate or undrestimate the success of partner incnetive programs? Also, what are the best ways to make the information you get wiht these metrics actionable in terms of making partner programs more useful for everyone involved?

  2. Michael Kerman
    September 23, 2013

    Hailey,

    Based on my experience working with clients and having run marketing departments in prior roles, I believe that most people over-estimate the effectiveness of their partner incentives. In terms of making the data useful, I think there are a couple of key steps:

    1)  Make sure the data is as accurate and “clean” as you can get it

    2)  Share the results with all involved stakeholders including other marketing functions, sales, finance, operations.  Transparency is the key to trust, respect and collaboration

    3) Make it clear what the results are vs. plan

    4) Conduct some 1:1 interviews with a sampling of partners (large, small, long-time, recent) to understand how the incentives were perceived, communicated, processed, etc.

    5) Apply good root-cause analysis techniques to understand the variance (+ or -) vs. plan

    I think one of the key issues is that steps 1-5 take time, resources.  Often times, channel teams are focused on banging-out the next dozen promotions… focus on results over activity.

  3. ahdand
    September 23, 2013

    @Kerman: Yes if you can make the data clean and accurate, I think it's a good thing to start off things.   

  4. Michael Kerman
    September 24, 2013

    While this can be a challenge and time-consuming, it saves lots of time later on when people start to question the outcomes and eventually, the data integrity.  Good idea to spend some time and/or money to get it as clean as possible.

  5. Houngbo_Hospice
    September 24, 2013

    “1)  Make sure the data is as accurate and “clean” as you can get it”

    The cleaner the data the better the accuracy of the results. 

    Thanks for pointing to that. 

  6. FLYINGSCOT
    September 24, 2013

    Would you be able to mention which companies you consider to be best in class so we can collectively study and leran something from them?

  7. Michael Kerman
    September 24, 2013

    Well, I generally don't like to mention specific companies because even with best-practices, there's lots of subjectivity involved and it's so easy to miss some top-notch companies.

    One way to find the companies that are doing this right is to flip the perspective… look at it from the partner's perspective.  What do the channel partners say?  I am sure there are many surveys, across all industries, that are from the partner angle.

    If you want to discuss best-practices and other learnings around improving channel performance, you can contact me at .

  8. Michael Kerman
    September 24, 2013

    My pleasure!  I can't tell you how many man-months I have personally spent cleaning up data so I can analyze it and develop some conclusions and recommendations. 

    While there is a lot of art in developing great incentives and programs, there's a lot of numbers too… and most executives are pushing marketing for more and more quantifiable value.  To do that, you must have clean data!

  9. Hailey Lynne McKeefry
    September 25, 2013

    Thanks Michael. This one particuarly caught my attention:
    4) Conduct some 1:1 interviews with a sampling of partners (large, small, long-time, recent) to understand how the incentives were perceived, communicated, processed, etc.

    This one is hard to do but critically important. I think equally important is closing the loop after you've implemented changes. This is a more consumerish example, but I frequent Peet's Coffee. In fact every friday morning i meet a group of colleagues for coffee and pastries. well, they hae pastries…I'm gluten intolerant (can't eat wheat) and teh breakfast case at Peet's is a gluten  fest. i always felt kind of left out. One day, i wrote an email to Peet's saying “You know, there are lots of food allergies…how hard would it be to add a gluten free baked good to your offering? I would be all over that.” I got a thanks for your input email…and six m onths later i got “Thanks ot your input we are adding gluten free offerings in our Northern California stores” Wow! I thoguht…and now every week i buy a pastry because i feel like i should support the change (and the GF Morning Glory Muffin is really quite lovely).  Post feedback feedback makes all the difference.

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