If your distributor network is facing stagnation and disengaged reps or distributors are prioritising competitors’ products, you’re certainly not alone. These are incredibly common pain points, but thankfully, there is a solution: sales incentive programmes.
IRF Top Performer studies show that high‑performing companies are significantly more likely than their peers to invest in incentive and recognition programmes. However, a lot of businesses still struggle to design programmes that really deliver impact. Getting this right is about understanding what really motivates your channel partners, and designing a scheme that balances your business objectives with their needs.
In this guide, we’ll focus primarily on incentivising your distributor partners and resellers effectively – but these principles apply equally to internal sales teams.
What Makes Sales Incentives Difficult to Get Right?
The difficult balance to achieve in creating a sales incentive programme is between performance metrics and incentives. To achieve your business goals this is what you need to get right. If you don’t, you might find it costly.
For distributor partners working with multiple vendors, incentivising the wrong behaviours can create internal competition and harm relationships. And spending money on rewards that don’t motivate your partners is like throwing cash in the bin. It’s also important to note that distributors often work with numerous clients at once, so your incentive programme isn’t the only one vying for their attention.
Another area where businesses sometimes come up short is in making incentives simple enough. Complex, difficult to understand programmes disengage distributor reps, so yours needs to be clear and easy to understand without a long explanation or complicated mathematics required.
It’s also key to set the bar at the right height. If it’s too high your channel partners will feel defeated from the beginning – too low and you’ll end up paying out for unremarkable results. Remember too that it needs to incentivise the middle and lower performers, not just reward the high performers for what they may be doing anyway.
Think Like Your Distributor
Before you build your incentive scheme, take some time to consider what your distributors actually want, as well as how they work. They’re usually very interested in the bottom line, so margins upsides, discounts and rebates can work well. However, it’s important to remember that financial incentives aren’t everything.
Distributors also appreciate support such as training, marketing materials, technical support, as well as access to your product roadmap and recognition of their partner position.
If you really want to know what your partners are motivated by, just ask them. These conversations can be invaluable in designing a scheme that works well for you both.
The Best Way to Implement a Reseller Incentive Programme
Here’s how to build an incentive programme specifically for resellers and distributor partners (using principles that also work for internal teams):
1. Define What You Want to Reward
Be clear about what you want to achieve. Do you want to penetrate new regions, clear slow-moving stock, or launch a new product? Your objectives will define the behaviours you need to incentivise.
For instance, if you’re launching a new product line you might want to reward first sales, customers demonstrations and training completion. However, if your focus is growth, volume-based incentives might work better. It’s vital to be specific with your goals in order to succeed.
2. Select the Appropriate Incentive Type
As well as matching incentives to your business goals, you need to match them to your partners’ motivations. Rebates and cash bonuses tend to work well for short-term goals and immediate impact. If you want to incentivise sustained performance and loyalty, non-financial rewards can be very effective – such as certification programmes and exclusive access to new products.
Getting a scheme right often means including a mix of these incentive types. This might mean financial incentives for an immediate boost to motivation, with additional non-financial rewards that show your commitment to the partnership and help build strong relationships.
3. Communicate the Programme Clearly
As mentioned, an incentive programme needs to be simple enough that partners can understand it. They need to know:
- What behaviours or results are rewarded
- How rewards are calculated
- When to expect payouts
- How to track progress
- Who to contact with queries
Incentive programmes benefit from regular communications on performance, wins and opportunities to keep partners engaged.
4. Balance Motivation with Sustainability
Very importantly, your organisation’s programme needs to be financially sustainable. You need to be able to offer meaningful incentives without undermining profitability (we’ll share specific recommendations for percentages shortly).
The timing of payments matters too. Immediate rewards are great for short-term boosts, but you can sustain motivation and momentum longer term with quarterly or annual rewards. As with choosing incentive types, a combination often works best.
Sales Incentive Programmes for Distributors
For your distributor network specifically, here are proven incentive types that drive channel performance:
1. Volume-Based Incentives
Distributors often respond well to volume-based incentives and this is a nice, straightforward approach to take. It simply means rewarding partners for hitting specific sales volume targets.
Tiered discounts, rebates or bonuses that increase the more partners sell are a common way of doing this. For example, depending on your product and margins models, you could offer an additional 2% rebate for £50,000 in quarterly sales, 3% for £75,000 and 5% for £100,000.
Volume-based incentives are particularly effective if you’re focused on growing your market share or you need to shift large quantities of products fast.
2. Product-Specific Promotions
Product-specific incentives work well if you’re launching a new product or wanting to shift focus onto higher-margin items. You might offer enhanced margins on certain products, first-sale bonuses or SPIFFs (sales performance incentive funds).
You might also consider offering bundled incentives. This is where partners earn rewards for selling complementary products together.
3. Tiered Performance Programmes
Tiered programmes are useful because distributors vary considerably in size and capability. Different tiers have their own targets and rewards so that all distributors can feel motivated.
4. Loyalty & Rebate Programmes
If you want to reward consistent performance long-term, loyalty programmes can work well. They recognise partners that maintain good relationships, have low end user churn, provide valuable customer feedback, take part in joint-marketing activities and complete training.
Because this kind of programme rewards long-term commitment, rebates are usually paid quarterly or annually.
5. Gamified Competitions
If you really want to optimise engagement, challenges, contests and leaderboards can be effective by creating a friendly rivalry.
Gamification works especially well for short-term sales pushes, but it’s important to make sure it doesn’t create unhealthy competition that damages relationships or the customer experience.
Don’t Make the Incentives Too Complicated
As we’ve touched on, it’s vital to make sure that incentives aren’t overly complicated. If your scheme requires a partner to have a degree in maths, or a spreadsheet with layers of conditions, they’ll lose interest quickly, and your programme won’t deliver the impact you’re hoping for.
Incentive schemes need to be simple, user-friendly and based on a few clearly established KPIs. Your partners should be able to explain it in under two minutes to their sales teams. If that’s not possible, it needs simplifying.
Simplicity also helps your team out. It means less time answering questions about how the programme works, giving you more time to support the latest sales push.
How Much Should You Invest in Sales Incentives?
At E360 we recommend allocating 5-10% of the incremental revenue you expect to receive from the programme. The word ‘incremental’ is important here – you don’t have to pay out 5-10% of all revenue, just of the extra sales gained through the incentive programme.
For example, if you expect to generate £500,000 from the programme, you should probably budget £25,000-£50,000.
And remember, not all incentives need to be financial. Non-financial rewards might include:
- Awards at industry events
- Early access to new products
- Strategic planning sessions
- Certification programmes
- Enhanced marketing development funds
- Training sessions
- Exclusive events
How Do You Track the Effectiveness of Your Channel Partner Incentives?
Tracking your incentive scheme is key to understanding how well it works, and to allow you to adapt your approach based on the data you receive. But how exactly should you do this?
Define KPIs
It’s important to define KPIs before launching your programme. These might include:
- Revenue growth from partners
- Number of new product sales
- Average order value increases
- Partner engagement rates
- Customer acquisition through the channel
- Partner retention and satisfaction scores
- Capture Baseline Data
This is key to allow you to understand how much uplift the programme has delivered.
Calculate Your ROI
The basic formula for this is:
ROI = (Revenue gained from programme – Programme costs) / Programme costs × 100.
This data will help you decide whether to continue, modify or expand the programme. The most successful incentive schemes evolve over time using such insights.
Deliver Sales Success with E360
Whether you need to energise your distributor network or refocus your internal sales team, when done right, sales incentive programmes can motivate reps and distributors and drive sustainable business growth.
Here at E360 we’re experts in delivering sales success, whether by supporting you in designing incentive schemes or creating and implementing effective sales strategies through our outsourced sales professionals and experienced Account Executives and Channel Managers.
Get in touch with us today to discuss your sales goals and how we can help you achieve them.