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Using Mixed Incentive Strategies To Own The Channel

“Once an idea has taken hold of the brain it’s almost impossible to eradicate.”  ~ Cobb, from the film Inception

I love that movie and I love the above quote.  I think of it often when a new idea just won’t leave me alone, an indicator of how I know I need to take action.  Starting my company back in 2008 is a perfect example of this.

Here’s a powerful idea I want to plant in your brain if you work in sales operations or channel marketing.  It’s the idea that you now have the ability to work combinations of different push and pull strategies in your channel, measuring along the way and ultimately finding the perfect mix to help you own your channel.

Old Ways, New Ways

Not long ago, it was very common practice for IT resources to be siloed within a large enterprise.  Every department had their own space and everyone worked exclusively from their own database.  The thing is, this was by necessity of limitation and if you’ve been in channel marketing for a while, this has likely caused you some frustration along the way.  This way of working may even have eroded your brand’s margins at some point and nobody detected this fact until after two different divisions had offered incentive programs.  This was the old reality.

I’m here to remind you how good we have it in 2016.  Most enterprises are now working in shared environments and from a common CRM or other platform that gives us access to a shared database containing all the information we need to do more sophisticated work.  It’s time to leverage that power and if it means changing the way your run your programs, I would challenge you that it is well worth your while to try that.  Your people in charge of SPIFFs, your rebate team and the co-op folks can now actually work together, shifting a bit in and a bit out of each program until you reach the perfect blend that helps you own your channel.

Something For Everyone

I want to stress here that what I’m proposing is extreme customization of how you do your promotional spend.  Your needs are going to be unique and likely to be every changing.  The same holds true for the needs of all your partners but there is no need to compromise: you can have your cake and you can also provide cake to others.

I know that while new, this idea isn’t actually too radical compared to what many companies are doing now, and so hopefully you are comfortable testing out something that pushes a bit beyond the usual.  There are lots of brands that offer a sell-in discount and then combine it with a co-op program.  These are well and good, but they are not holistic in the sense that they don’t consider all the participants involved in getting a sale done out in the channel.

Top Influencers

By the estimate of everyone from brand VP’s to the retail sales associates (RSAs) themselves, the floor person can move a retail customer onto a different product in 75 to 85% of sales scenarios.  Let’s consider the above strategy in light of this new information:

The brand has a need: the brand wants to sell more products to the channel.  The channel partner has a need: they need to grow their bottom line.  In the above discount/co-op scenario, both needs are being met: the brand offers a sell-in discount so that the dealer buys more.  The dealer has the opportunity to grow their bottom line by selling the product at an enhanced margin.  They can also enjoy the co-op program as a way to bring more customers to the store. 

But what of the RSA?    If the dealer’s top sales associates in their stores aren’t aligned with the program (and why would they be?  They aren’t being considered in the incentive plan!) then they could be knocking the whole works out of bed every time they speak with a customer.  Remember, the big idea here is that your brand should own the channel or the person who owns the floor at each dealership is going to do what is best for them.

Consider also customers who have no preference for any brand and are looking to purchase the brand that offers the best value to them, a personal formula that very includes final sale price.

If you look all the way through the channel, right down to how each deal is unfolding on the sales floor, you can now detect the different points of leverage and start optimizing at each stage.  Your brand can own sales in the channel. 

Ask yourself the following questions:

*How can I attack this channel holistically?
*How can I educate everyone involved (RSAs, consumers) about my programs and get them locked on my product?
*Am I minding my margins with this approach?

A Holistic Methodology For Your Channel

Look back on all the players we have named in each retail sale: you have your brand, your dealers, the RSAs and the consumers themselves.  The task is to take your incentive spend and then see how a segment of it can be used to address the needs of each actor down the channel, making sure that they feel appreciated by and connected to your brand.  Does your dealer even value a sell-in discount, or do they resent the pressure to load up on inventory?  Would a sell-through allowance make them happier?  Are they using their co-op dollars?  What are they using them for?  Is a lack of sales incentive the only thing stopping their top salespeople from recommending your brand?  Would a consumer rebate move the needle the rest of the way to hitting your business goals? 

Appropriate Visibility

Now that you have optimized your spend in a more holistic way, what are you doing to make sure that each player in the channel knows that you see them and that you understand their needs?  What is the best way to reach your channel partners, RSAs and consumers to let them know the great news? 

Guard Your Margin

To be clear, I’m not suggesting that you should be spending more on channel incentives.  On the contrary, experimenting with this approach may reveal ways in which you can actually allocate less budget toward promotions.  The robustness of the reporting you receive on your results is likely to contain answers as to the way forward, but that robustness is only as powerful as the software you’re using to manage your programs.

This is a powerful idea, and I hope it will take hold in your brain.  It will take action but the work will definitely be well worth it.