A Publication of hawkeye Channel

Prioritizing your channel incentive investment for maximum effectiveness A PRACTICAL GUIDE FOR DETERMINING YOUR BUDGET ALLOCATION

© 2014 hawkeye Channel

Overview: This guide provides an approach to help you determine how to best spend your channel budget across the many types of available programs. Find the right level of investment for each program so you can create the proper synergy to optimize the sales and marketing performance of your indirect partners’ effectiveness, without overspending.

Contents:

2. Introduction

3. Behavioral Conditioning

4. The Behavioral Matrix

6. Considerations that impact program design

7. The investment calculator

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Introduction: What is the best level of investment for me? Like their counterparts in direct sales, it has often been said that indirect sales channels are “coin operated.” And, because marketers lack the control over their indirect sales channels that they have over their own employees, they use more types of incentive programs to influence a broader range of behaviors. For most channel marketers, the plethora of channel programs that may need to be funded can be daunting. The challenge is to find the right level of investment between programs to optimize the sales and marketing performance of their indirect partners (effectiveness) without overspending (efficiency). As a result, most channel marketers must answer these questions: “How can I best allocate my budget across the various programs?” And, “Which programs are going to give me the most returns with the least level of investment?” This guide provides a structured approach to answer those questions.

Like their direct sales counterparts, it is often said that channel partners are coin operated.

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Incentive programs typically represent the largest portion of a channel marketer’s budget. This is especially true when one considers the broad range of incentive program offered by today’s channel marketer, including: MDF/Co-op, Rebate, SPIFs, Deal Registration Discounts and others.

Behavioral Conditioning Start with a clean sheet of paper (figuratively of course) and list all of specific behaviors you want to motivate through your channel. If you begin with the program, you will likely overlook the true potential of that program, and miss some key metrics that will help you track that programs success. For example, ask yourself this: are there clear objectives and KPIs associated with your promotional allowance program? Or, do you treat your Co-op/MDF program simply as a cost of doing business to be competitive? Knowing where to invest begins with an understanding of the specific behaviors you want to influence within your channel. When deciding which behaviors are important to you, and therefore where to invest, you should consider: 1. The lifecycle of the partners themselves (what skills are needed to onboard

new partners to shorten their time to revenue) 2. The lifecycle of a given transaction (lead generation, and sales closing skills

required) This list of desired behaviors provides the foundation for program design, including objectives, strategies and KPIs. Here is an example of a list of desired behaviors: • Advertising and/or marketing your products • Technical training • Sales and marketing training or certification • Reporting of active sales activity and have pipeline visibility—and specifically

the products, deals or value • Achievement of long-term sales growth • Closing leads that you forward to them, or reporting on the status of those

leads • Creating new opportunities for specific deal types

Your list will likely be longer than this, and you should keep in mind that the more specific you can make each item on your list, the better. The specificity you assign to each item will directly correlate with the KPIs used to evaluate attainment. As a rule, for every Go-To-Market strategy you have as an organization, there should be a corresponding behavior you are trying to influence with your channel. Once you have your list, prioritize it by level of importance – those with a higher priority will likely require a higher level of investment.

Focus on the behaviors you want to influence, not the programs.

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The Behavioral Matrix Each of the desired behaviors on your list can ultimately be categorized within one of 4 quadrants as represented in the following matrix: The Columns: Post sales rewards On the surface, it may seem that most of your channel investment should focus on this area because it assumes your channel partners have attained sales goals, presenting less risk for you. Investing entirely in post-sales rewards means you assume your partners are willing to make their own investment in marketing your products, training their sales teams, and other skills required to sell your products. If you are really serious about enabling your partners to generate their own opportunities or improve their close ratios, then investing in pre-sales enablement activities is likely the right choice over the long run. The columns: Pre-sales enablement Driving effective channel performance means lowering the time to revenue for new partners, and helping existing channel partners improve their ability to build their pipeline and attain higher close ratios. An investment in pre-sales enablement is, effectively, teaching your partners “how to fish,” which will generate larger sales pipelines and higher close ratios in the long term.

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Pre-Sale Enablement

Post-Sale Reward

Organizational

Transactional

? ?

? ?

Increased competition for the best channel partners, and the desire to improve productivity, is shifting investment to pre-sales enablement.

The Behavioral Matrix The Rows: Organizational focus These behaviors and related programs target the partner organization as a whole or the collective efforts of all the stakeholders within the organization. Encouraging the marketing and promotion of your products via an allowance program (e.g.: MDF or Co-op) is an of an example effective strategy to influence at the organization level. The Rows: Transactional focus These behaviors and related programs will influence the outcome of a specific transaction or sales opportunity. Incentives are either designed to target the individuals that most influence the sale (e.g.: sales people, SEs or others) or they may be rewarded to the organization as a whole. Using the sample list we created earlier, the final matrix looks something like this:

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Pre-Sale Enablement

Post-Sale Reward

Organizational

• Advertising/Marketing • Sales Training • Technical Training

• Attaining Long Term

Sales Goals

Transactional

• Registering

Opportunities • Lead Follow-up

• Closing Deals

Some desired behaviors will influence the partner org as a whole, while others will influence a specific sales opportunity.

The behavioral matrix How do your channel incentive programs align with the behavioral matrix? Here is how typical channel incentive programs fit within the behavioral matrix:

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Pre-Sale Enablement

Post-Sale Reward

Organizational

MDF/Co-op

Partner Rebates

Transactional

Opportunity

Management

Loyalty/SPIF

With your list of desired behaviors completed, it is easier to identify program objectives, KPIs and the relative importance of each.

At this stage of the exercise you would have: • A list of specific behaviors and activities you hope to influence. • A list of KPIs related to each that will keep you informed of goal attainment. • An understanding of which channel programs may be utilized to achieve those

goals.

Considerations that impact program design There is not a one-size-fits-all approach to program design. We encourage a “crawl, walk, run” approach to evolve your program, and to focus on the ease and simplicity of partner administration and communication. Listed below are some guidelines to help you decide how to structure your programs, and how to spread your investment across each of the 4 quadrants of the behavioral matrix. Channel segments: It is unlikely any one program can be structured to address the needs of multiple partner segments. Rather than settle for a compromise, it will be advantageous to tailor each program to meet the needs of distinct channel segments and go-to-market models. Your program mix between segments may be different as well.

Partner lifecycle: In general, new partners require more training and more assistance to help jumpstart their sales process and shorten their time of sale. Conversely, mature partners may be more motivated by with post-sales rewards if other pre-sales enablement requirements have been met. Consider “jump start” programs to onboard new partners to reduce time to productivity. Target market: Do your products target niche markets or early adapters? Are they mass market products (“value” vs “volume” categories as is often referenced)? Typically, mature products in higher volume categories will benefit more from post sales rewards. Product differentiation: Is your product highly differentiated within the category? Or is it in a highly commoditized category? Companies with more commoditized products will often focus incentive activities on aggressive pricing and post-sales rewards. Sales cycle: Longer sales cycles are generally the result of higher value product categories that require more consideration by the buyer prior to purchase. In these instances, the partner must possess high levels of sales and marketing skill to be effective in selling your products. As a result, you would likely benefit from more visibility into their sales processes, pointing to an investment in pre-sales enablement, such as deal registration.

There is no one-size-fits-all approach to program design.

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Considerations that impact program design Brand recognition and customer demand: Are your products highly sought after by the end user? Do your partners simply have to fulfill demand because your brand and products have so much cache? Or, do your resellers have to work hard to sell your products over competitive brands because of the lack of consumer mindshare? In the case of the former, your indirect channel partners will want to advertise and promote themselves as authorized resellers, which may be accomplished through Co-op programs. If it’s the latter, your partners may be more influenced by incentives that directly drive sales activities via post-sales rewards. Ideally, in these instances, you may want to focus your investment where the rubber meets the road — the individual sales rep who controls that sale via a SPIF or rewards program. Competitive environment and distribution arrangement: What the competition does is important – particularly if your distribution channel is also able to sell competitive products in addition to your own. As independent businesses, your channel partners are going to be influenced by the products and programs they feel will best benefit their business. This is where a well designed program can provide you with a competitive advantage.

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A well designed program can provide you with a competitive advantage.

The investment calculator http://www.hawkeyechannel.com/budget-tool/ Use the investment calculator to help you determine where to allocate your budget. • Adjust the sliders to align with your product characteristics • Hit “calculate” once your values are determined • Percentages of investment indicating how you should allocate your budget for

pre-sales incentives vs. post-sale rewards will be displayed

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About hawkeye Channel hawkeye Channel provides software and services that drive channel revenue growth for enterprise marketers who sell through indirect channels. With a unique blend of robust channel programs and expertise, hawkeye Channel helps clients easily integrate with their CRM platform, accurately measure channel performance and optimize channel incentives on a global scale. www.hawkeyechannel.com

Use the investment calculator to get started, or to validate your current program structure.