Modern Channel Incentive Programs for IT & SaaS Products: What Works Today

However, the channel ecosystems have changed over the last few years, especially after the pandemic. As a result, partners’ expectations have changed a lot. Besides revenue sharing, they are now looking for more vendors’ involvement and rewards.

They expect:

• Clear and frequent communication
• Lead sharing and opportunity management
• Training and development programs
• Marketing enablement
• Ease of experience (earning and participation)

If you are utilizing channel partnerships, traditional partner programs and rewards aren’t enough anymore.

To make such partnerships work, you need to build the right programs and offer the right incentives to different partner segments.

If you are wondering how then this is your guide. This article covers what modern channel incentive programs should look like for IT businesses and how to implement them.

Let’s dive in!

What is a Channel Incentive Program

A channel incentive program is a strategic approach to achieving desired business goals by incentivising channel partners.

In other words, an effective channel partner incentive program can result to:

• Increased sales
• Marketing growth share for the vendor
• Brand awareness and customer loyalty
• Lasting and mutually beneficial vendor-partner relationships
• Motivated, productive and proactive partners

81% of partners feel rewards and incentives are crucial for strengthening a vendor-partner relationship.

A good number of IT and SaaS brands, like their FMCG counterparts, stick to traditional incentive programs. The most common examples of the same are - sales incentives or rebates.

However, IT partners’ priorities and focus have changed to match customers’ new consumption habits and other changes. For instance, the subscription model has replaced traditional up-front large sum IT deals in recent years. If you pay your partners based on the total deal amount at the end of the year, many partners may not find that motivating at all.

Ideally, the best partner incentive programs should be flexible and subject to frequent changes. However, in reality, that is often not the case.

Modern vs. Traditional Incentive Programs: What’s Changed

Traditional incentive programs don’t often translate well in the IT and SaaS industry. That’s mainly due to one major reason: they have roots in traditional businesses.

Traditional incentive programs were pretty effective 15-20 years ago. Back then, partners’ go-to-market strategies revolved around vendors like Cisco, HP, and Microsoft. Partners flaunted their gold or platinum-certified status everywhere—from business cards to websites.

Things changed with the rise of cloud-based models. Now, apart from on-premise hardware, customers use every bit of technology, from infrastructure to storage, from the cloud. As a result, customers value what they are getting over who the vendor is.

Also, popular SaaS models like monthly subscriptions don’t fit well with traditional incentives. For instance, if a partner managed to bag 25 customers over a quarter, how would you reward them?

Are you going to share revenue at the end of the quarter for all 25 customers? Or less than that? What if your product has a freemium model and some haven’t upgraded yet? Or is it better to send it right after they sign each customer in?

Such changes compelled VARs to focus more on their branding and rethink their views on vendor partnerships.

Understanding Partner Experience in IT and SaaS Industries

To better understand the nuances of effective channel incentive programs in the IT industry, you must first internalize partner experience (PX). Partner experience, as the name suggests, is similar to customer experience (CX), but the end-users here are your partners. Like CX, a smooth PX leads to better partner engagement, increased productivity, and sales.

There is another similarity between CX and PX: Usually, the same forces shape both. Like the emergence of Gen Y/Gen Z and their buying preferences, the general shift in the sales cycle (e.g., more DIY), evolved tools, engagement practices, etc.

Here are some factors that made PX more complex than before:

1. Demand for More Value for their Business Growth from Partners

In the coming years, IT partners will be more focused on their long-term goals than simple revenue sharing. And they will have more vendors to work with than ever and that’s why most partners will start to consider vendors who can provide long-term values like demand generation, marketing enablement, and lead sharing.

2. Demand for More Engagement from Partners

Long gone are days when vendors can send an email to their partners and call it a day. Now, partners seek clear and frequent communication, proper training, and personalized incentives. Those are doubly important if partner sales reps are doing the heavy lifting. As a result, vendors who can match partners’ goals to their incentive programs become more attractive options.

3. Emergence of Influencers

Influencers play a significant role in the IT and SaaS industries. Bloggers, CEOs with powerful personal brands, and consultants often have a loyal reader base of varying sizes. They can be powerful partners too. Affiliate programs are popular among influencers.

The presence of such heterogeneous groups of potential partners within the same ecosystem is what makes IT channel marketing complex.

4. Vertical Selling Approach

IT partners prefer channel marketing plans catered to their industry and expertise. After all, vendors with industry-specific strategies bring more long-term value and are easy to collaborate with. Hubspot is an excellent example of a vendor that combines vertical selling with its partner program.

5. Complexity in Subscription Models

The rise of the subscription model has a profound effect on partner experience. Before, it was easy to offer one-time incentives against IT deals. However, it is much harder to incentivize when your partner sells your subscriptions to your customers.

Solution?

Have a flexible reward system that offers incentives based on two key factors:

• 👉 Number of sales closed
• 👉 Desired actions taken

Essentially, most of these steps are about making the partner experience better. Therefore, if you want to understand partner experience in-depth, you should start from the partner journey.

Partner Journey: An Integral Part of the Modern CIP Success

Partner journey is the customer journey equivalent of partners. In other words, it is the process of visualizing the way a partner goes from choosing the right vendor to being a loyal partner.

Once you map this journey, you can adjust your effort to establish a profitable and sustainable channel partnership with the right incentive programs. You can break down the entire partner journey into three different stages:

• 👉 Consideration
• 👉 Conversion
• 👉 Commitment

Stage 1: Consideration

Partners enter into the consideration stage way before getting in touch with a vendor. In this stage, partners try to get a feel of what a potential vendor offers. For example, the partner might ask questions like:

• What would the growth opportunity be?
• Is this product/service relevant to my customers?
• Does this vendor partnership bring long-term value to my business?
• What is the reputation of this vendor?
• Is this vendor a fit in culture, size, and market positioning?
• What about rewards and incentives?
  

In this stage, potential partners consume relevant content, ask peers for recommendations, and look for past success stories.

Stage 2: Conversion

Once the partner selects a handful of potential vendors, they set their feet on the conversion stage. Here, partners take a closer look and weigh their options. Here are some important questions to consider during this stage:

• What do the vendor’s onboarding, training, and incentive programs look like?
• Is this partnership scalable?
• What kind of result does this vendor bring for their partners, and how?
• Is there any pilot program for testing the water first?
• What do other stakeholders inside the organization think about this partnership?
• Will the overall experience be a pleasant one?
• Does this vendor have clear rules of engagement?

In this stage, partners look for more info on vendor programs. They might even reach out to the vendor.

Stage 3: Commitment

This is the last stage where partners (or VARs) finalize their choice of vendor program. This is also the phase when it is time to think about scaling and reaping the benefits. Partners decide how to manage new products or service bundles. At the same time, they also determine if they want to push the margin higher with the vendor by using business process automation.

Sales reps from the partner’s side expect more support from the vendor at this stage. The most common questions partners usually raise are:

• How to optimize joint selling efforts?
• Is this vendor a decent long-term partner?
• Do QBRs (Quarterly Business Reviews) and metrics meet my business needs?
• Is the vendor’s high-level training good enough?

They also decide whether to scale, maintain or terminate the relationship in this stage. Factors like ease-of-doing-business, communications, and profit margin play crucial roles in this decision-making process.

6 Steps to Improve Partner Experience in the Partner Journey

You, as a vendor, can take a few actions to make the experience smooth for potential partners (and win partners who are a good fit in the process):

1. Share your content with your prospective partners. Describe your program in detail and what benefits you offer. What assistance do your partners expect from you? What would be the profit margin? What are your rules of engagement? Be upfront about your program. Your goal is to build interest among the right prospect groups. Also, share partner success stories. Prospective partners are interested to know what kind of experience their peers had. Feel free to interview your existing partners and showcase their testimonials.
2. First impression matters in the partner-vendor relationship too. Be an attractive option by developing a robust but straightforward onboarding process. Also, invest in a responsible partner success team. If you can offer a pilot program to give your partners a glimpse of what the partnership would feel like without committing fully, that would sweeten the deal even more.
3. Show the partner the value they can get out of this partnership. To accomplish that, communicate how selling your IT product/service impacts their revenue to your partners. Also, discuss how you can help them scale by building an automated selling process.
4. Create a joint business plan so that both parties clearly understand their expected contributions. Pay attention to your partner’s business practices. Once they start to grow, they will likely encounter bottlenecks and challenges. Help your partners plan and evade such situations.
5. Make ethical business practices a top priority. Layout the rules of the engagement first, then stick to them. If there is a conflict of interest between your own sales team and your partner’s, be ready to resolve the differences.
6. Come up with a flexible incentive program that encourages desired behaviors, relevant and quickly redeemable.

Types of Channel Incentive Programs

So far, we have covered what it takes to develop the right incentive programs for IT and SaaS businesses from a strategic perspective. Our focus would be more on tactical details for the rest of the article. So, from an execution perspective, what options do you have?

Let’s talk about the most common channel incentive programs for the IT industry:

1. SPIFs (Sales Performance Incentive Funds)

SPIFs are for motivating your VARs’ (Value Added Resellers) sales reps to sell a product or promote a new product. Vendors offer the reward based on the sales rep’s performance. Unlike other incentives, SPIF rewards go directly to the sales rep (not through the partner). It’s effective when you need to get some sales momentum during slower times.

Usually, SPIF incentives involve cash. But you can offer non-monetary rewards such as gift coupons, birthday gift cards, show tickets, membership, vacation, etc. For non-monetary rewards, gifts and incentives platforms like Xoxoday can be of immense help as they provide a plethora of choices, ease of sending incentives, and keeping a tab on redemption.

There are a few downsides to SPIFs as well.

• It promotes competitive dynamics, which can get toxic and foster toxicity in the workplace. Some reps can use underhanded tactics to outcompete their peers.
• SPIFs are always reactive. It’s not the best way to encourage desired behaviors across the organization.
• Poorly planned SPIFs can divert the team’s attention from the bigger goals.

2. Rebates

Rebates are applied when your partners sell a predetermined volume and get a percentage of the sales back as a reward. They can keep this reward to themselves or pass down a part of it to their customers. The main difference between rebates and discounts is you purchase at a lower price with a discount, whereas you get a cashback later in case of a rebate. In B2B industries, rebates are often volume-based.

The main downside of rebates is if mismanaged and the payout gets delayed, partners may lose interest and abandon the whole partnership.

3. Activity-Based Incentives

Most incentives programs treat achievements such as deals closed and revenue generated as yardsticks. However, activity-based incentives motivate partner sales reps to take actions that lead to more sales. In simpler terms, you encourage sales reps to engage more in activities like making more customer calls, attending training webinars, and frequently organizing demo sessions.

Please note activity-based incentives are not for star sales performers. In Xactly Corporation CEO Christopher Cabreara’s words:

“Activity-based compensations work better with younger, less experienced teams.” On the other hand, senior sales reps prefer to get paid for closed deals.

4. Market Development Funds (MDFs)

Vendors offer MDFs to assist with VARs marketing efforts and promote vendors’ solutions simultaneously. The incentives can be either financial or knowledge-based. Some such marketing efforts may include:

• Organizing webinars
• Radio shows
• Getting a booth at a real or virtual event

Often partners fail to utilize MDFs properly for several reasons:

First, short “use it or lose it” deadlines. According to Amazon consulting, many partners don’t get enough time to prepare as offers last as little as 30 days (or a quarter at max).

Second, many MDFs come with strict rules and policies. That stops partners from going creative. After all, the partner will not be reimbursed if they break any rules.

So to make your MDFs effective, introduce liberal rules and extend the deadlines. Also, you want to work closely with partners as many don’t have extensive experience in marketing and advertising.

5. Deal Registration Incentives

In a deal registration incentive program, you reward your partners for identifying potential customers and referring them to your service/product once those referrals convert.

Usually, channel partners send the list of potential leads for you to check the lead quality. Once approved, they have a set time frame to convert those leads and get the reward.

Please note rules of engagement and clarity are crucial here. You don’t want to be in a situation where your VARs feel your internal sales reps have stolen their leads.

6. Staffing or Embedded Headcount

As a vendor, you can assign one of your team members to work with your partner side by side. The main goal here is to provide training and assist the partner with their targets. Once they hit specific sales numbers, you want to reward them based on those numbers.

7. Training Incentives

Complex products and knowledgeable customers demand sales reps to be thorough with the product information. The sales reps should be very familiar with product features, use cases, and industry trends. By incentivizing their training programs you can ensure sales reps’ participation. With the right training sales reps will be able to effectively position your products and overcome customer objections with ease.

How to Create a Channel Partner Incentive Program for IT and SaaS brands

Step 1: Identify your KPIs

The effectiveness of a CIP can only be understood with a set of KPIs. So start by making a list of KPIs (Key Performance Indicators).

KPIs for partners from different verticals can vary. The size of your partners’ businesses, culture, partner goals, and business models help determine which KPI you should choose.

For instance, VARs and ISVs (Independent Software Vendors) don’t mind if their sales reps benefit from the vendor directly. If those brands are your target partners, then SPIFs (monetary & non-monetary personalized benefits) and activity-based KPIs can work like a charm.

On the other hand, mid-to-large partner reps may not join such CIP because of the restrictions imposed by their organization. No wonder KPIs for that kind of business is different.

Thus, knowing your target partner is crucial.

You, as a vendor, probably want to work with multiple partners, right? Segment your partners into separate groups and figure out what works best for each group.

Step 2: Create incentive strategy

Believe it or not, rewards can make or break your CIPs. Therefore, you want to make sure your rewards match your partners’ expectations. Revenue sharing, travel, and coupons are some of the most common types of rewards you can think of. However, with the growth of the channel ecosystem in the IT industry, partners are now seeking intangible rewards like marketing enablement, training, lead sharing, and branding opportunities.

In some cases, you are better off with a hybrid reward system that combines two or more different types of rewards (example: access to exclusive networking opportunities + revenue sharing).

Also, cash rewards are often spent on routine expenditure, turning their emotional association with your brand to zero.

To solve this, try offering personalized gifts (a free ticket to a rep who is also a cricket fan, for example) to your partners to instill a memory. If we go by the numbers, 30% of the partners desire personalized rewards, so you can never go wrong.

Offering and managing personalized rewards are super easy with the Xoxoday platform. Go to the Xoxoday storefront, pick a relevant voucher from 21000+ available choices and send it to the recipients. The recipient can redeem it at any time from the Xoxoday platform. Alternatively, you can send xoxo points to your partners. They can use these points at any time and any way they want.

Details of recipients, the number of points spent, and the number of redeemed points— you will find everything on the Xoxoday admin dashboard.

Step 3: Communicate regularly

On average, tech partners work with five to eight vendors, and they have their own businesses to run. So make all the info accessible for your vendors to be aware of your offerings, terms, conditions, and other details. In addition, one or two emails per quarter are just not enough! You need to organize webinars, create a strong knowledge base, and provide training to every partner sales rep for maximum engagement.

Step 4: Measure the progress

All incentive programs come with a goal. It could be lead generation, giving more demos, closing more deals, or maybe something else.

Your partner accomplishes those goals for you in return for rewards. But are they making steady progress? Do they need any help? You will get answers to these questions only if you have a proper process to track their progress.

Based on your reports, you can decide when your partners need some motivation or assistance to achieve their goals. If required, you can reach out to them and find a way to make the partnership worthwhile for both parties.

Step 5: Analyze and calibrate if required

There is a possibility that the goals you had set for your partner do not look achievable amidst the program. You need to take an empathetic approach here. If required, modify the goals so that the partner doesn’t quit after coming so far in the program.

Step 6: Send rewards

Aah! Now comes the fun part wherein you send rewards to your hard-working partners. Rewards are the driving force of your program. To ensure that rewards serve their purpose, integrate an incentive enabler with your partner's performance tracking system.

For instance, you can integrate Xoxoday, an incentive platform with CRMs or SAPs or DMSs, or any other performance tracking system you use. Once your partners complete their goals, Xoxoday’s automated engine will send rewards on your behalf. The tool not only ensures that rewards reach the right beneficiaries but also makes reward redemption super easy.

Xoxoday storefront offers over 2000+ gifts. You can send rewards that your recipient would value the most. In other words, XoXoday helps you to provide greater PX, which pays off in the long run.

Tips to Make Your Channel Incentive Programs Successful

1. Think of your CIPs as an Investment Portfolio

If you pay close attention to an investment portfolio, you’ll notice that it has a mixture of assets—ranging from high-risk-high return options to the safest—which work in sync to give you the returns you want.

Think of your CIPs in the same way. Since there is no one-size-fits-all solution for all of your partners, it's best to implement multiple incentive programs for each partner segment. Some of these programs will be geared to quick wins. Rest will be long-term “investments” for filling up your sales pipeline CRM with hot leads.

2. Reward Desired Behaviors, Not Just Wins!

Use incentives to drive not only sales but other desired behaviors too. For example, do you want your partner reps to attend your training webinars? Consider sending them some reward points. Did one of the partner sales reps manage to beg a high-ticket client? Reward him for that specific deal.

3. Don’t Forget your Team Members

You will have team members who manage your channel partnerships. Interestingly, their productivity and enthusiasm also impact the success of your CIPs.

Kenneth Fox, the CEO of Channel Mechanics, suggests IT brands bring their account managers under CIPs. After all, your account managers are the first point of contact, and you want to keep them motivated.

4. Measure the Effects of your Partner Programs

Often, brands manage their partner incentive programs half-heartedly. Some don't even think of starting one. Have you ever wondered why?

Well, because it is hard to measure the impact of a partner program.

However, you can still make an educated guess on the full impact of a partner program by considering three types of metrics:

Profitability Metrics

• Total revenue generated from each channel
• Profitability of the channel
• Revenue shared with the partner

Opportunity Metrics

• The number of leads generated and converted by the channel partner(s)
• The time a partner takes to act on the lead
• The number of desired actions taken ( more sales call per day, for example)
• The average lead value

Partner Engagement Metrics

• How fast do the partner/ partner reps use their rewards
• The number of times partner/ partner sales rep log into the dashboard

You will find your answers from your CRM data.

Hubspot Partner Program: An Inspirational Case Study

Here are some key takeaways from HubSpot’s partner program:

Build a Product that Brings Value to Partners’ Businesses

For beginners, the Hubspot platform itself is so powerful that many of their partners’ businesses are built around it. With 300+ integration at their disposal, Hubspot partners often use the platform as a base and build various marketing solutions on top of it. Later, they provide marketing services using Hubspot-based solutions.

Having such a flexible product attracts potential partners in droves. Many answers on Quora directly from HubSpot partners from different tiers are proof of this.

Segment Partners into Different Groups

Hubspot works with partners of different sizes and from diverse industries. Their expectations, involvement, and output vary across the board. No single partner program can serve them all. To overcome this challenge, Hubspot found a way by segmenting its potential partners and further, offering tailored programs for each group.

Let Your Partners Try the Program before they Commit

Hubspot has a pilot program also: the solution provider package. It is mainly for future VARs who are not yet ready to commit as a partner. This scheme effectively gets some more signups that otherwise would have been lost.

Educate Your Partners

Content plays a huge role in the consideration stage. While researching, potential partners rely on vendor content to gauge compatibility. With 13 years of experience (the partner program was launched in 2009), the Hubspot team understands it. That’s why they support partnership and incentive programs with a considerable collection of landing pages, guides, blogs, and e-books.

Make Your Rewards Lucrative | Offer a Mix

Last but not least, Hubspot offers a mix of revenue, marketing, and sales enablement as incentives. This mix is far more attractive to VARs than traditional incentives such as SPIFs.

At the same time, HubSpot also divides its partners into multiple tiers based on their engagement and performance. From free tickets to exclusive events to better marketing enablement to early access to beta features – incentives for higher-tier partners are significantly lucrative compared to lower-tier partners.

Such intentional incentive disparity encourages desired behaviors and ensures more partner involvement. That being said, even lower-tier partners earn 20% of referred customers’ lifetime subscriptions (and some serious sales and marketing support on top of that), which is indeed an excellent reward. Overall, Hubspot partnership programs and incentive programs address the challenges of the IT and SaaS industry.

Key Takeaways

Channel incentive programs boost partners’ productivity, sales numbers, and lead generation. However, traditional CIPs don’t do very well in dynamic industries like SaaS and IT. Therefore, you need to adjust your incentive programs to meet partners’ expectations and offer a seamless partner experience. Here is a quick recap of actionable pointers for a successful channel partner incentive program:

• You can’t stick to usual monetary incentives anymore. Dealing with the new generation and advanced buying and selling behaviors demand creativity with incentives.
• Channel partnerships are no more transactional; you need to invest in a deeper relationship with partners. You need to think of CIPs as a part of your investment portfolio.
• With 8-10 vendors for every partner, the competition is huge. You will win only if you go out of your way to ensure your partner’s success.
• Tailoring the partner programs for different segments is a necessity in the IT and SaaS industry depending upon the readiness, maturity, and business of partners.
• Using the right tools for enabling incentives and measuring engagement gives you the right direction for the continued success of your partner programs.

Platforms like XoXoday can help you manage incentives for your channel incentive programs in a way that’s:

• Efficient from an admin perspective
• Effective with a plethora of choices for incentives
• Trackable with redemption reports
• Engaging with instant gratification to beneficiaries

Translate your happy channel into a higher market share. Reimagine and craft your channel with digital rewards & incentives. Download your actionable guide today!