10 Popular Channel Incentive Programs that Works
Perfectly for FMCG Businesses
According to Incentive Research Foundation, the per person incentive spent is expected to rise to
$806 in 2022 from $764 in 2021. As a result, the overall incentive budget will increase by 34%.
If that stat wasn't convincing enough, then hear this interesting story.
Last Saturday, I was at a pharmacy to buy ‘Cetirizine’ for my housemaid to help her
overcome allergy issues. The pharmacist said, "I have the same drug from another company
called 'ADEZIO,' a little expensive but more effective."
ADEZIO came with a price tag of $7.50, whereas the regular cetirizine was $2.50. I
purchased ADEZIO to try it. It is common for anyone to spend a little extra on health and
convenience. Fair enough.
But let's look at the other side of the story. What made the pharmacist sell ADEZIO over
cetirizine? Any guesses?
Well, he had a vested interest, of course. The reason is apparent. ADEZIO would have
incentivized the pharmacist to sell their drugs over other brands. There is also a possibility
that the regular cetirizine seller is not collecting point-of-sale data to drive his channel
incentive program, thus, losing on sales.
Whatever the reason is, ADEZIO managed to leverage this channel to increase sales, and they
could pull this off by incentivizing their partners smartly.
📙 The moral of the story is: incentives have the power to make or break your channels.
Do you collect the point-of-sale data to get such insights and re-calibrate your channel
incentive programs?
No? Then read this.
According to HBR, by rewarding partners for data sharing, manufacturers improve visibility into
customer needs, an activity that most manufacturers fail to do.
Data sharing is just one of the many behaviors you can incentivize. You may choose to
reward different behaviors or performances of channel partners based on the goal you want to
achieve.
Let’s dive into the nitty-gritties of channel incentive programs to help you understand them
better.
Types of Channel Incentive Programs Popular in
FMCG/FMCD Industry
Your channel is the backbone of your business. Hence, it is crucial to pick a channel
incentive program for your partners that keeps them motivated.
But the question is, what type of channel incentives should you opt for? What goes well with
your partners? How can you keep them motivated to generate more sales for your business?
To answer your questions and keep you away from perplexities, we have listed the various
types of channel incentive programs with examples. These will give you a complete picture
of what works in the traditional FMCG/FMCD world.
1. Sales incentives
Sales incentives are a way to reward channel partners once they reach or exceed a specific sales
goal. It is not only the most widely used incentive program in the FMCG/FMCD sector but also a
proven technique.
Sales incentives are usually given as point-based rewards, gift cards, single-use debit cards,
etc.
Goals: Sales incentives help the company scale in all directions. It depends on the
purpose they are being used for. You can leverage sales incentives to meet short-term
(revenue targets) and long-term (build brand loyalty) business goals.
Challenges: Since sales incentives focus only on ‘sales,’ partners often concentrate on
revenue-generating activities while losing interest in other business aspects like
building relationships. They are expensive, which makes it hard for small businesses to
afford them. Small companies new to it might not have the budget to afford a sales
incentive program.
Example: Indiakaloan.com is an advisory service in the banking sector, which offers its
channel partners various sales incentives such as vouchers and coupons to achieve specific
revenue targets. Besides that, they also offer business growth opportunities for their
partners.
The same old, boring rewards might not excite your partners anymore. To stand out and make
an impact, explore Xoxoday’s global-rich catalog to shower your partners with unique gifts.
2. SPIFs or SPIFFs (Sales Performance Incentive Funds)
According to HubSpot, SPIF is a short-term, incentive-based initiative that motivates sales
representatives to achieve business targets.
The concept of SPIF boils down to telling your sales reps, "If you move X amount of product
or schedule X amount of demos or close X amount of deals within a fixed timeframe, you get
a reward."
Most SPIF incentives are financial, but prizes, vacations, and recognition can all serve as the
basis for an effective SPIF program.
Gift cards are also a safe bet, but they lack the expression of thoughtfulness at times. If
salespersons need to speak to multiple decision-makers to close a deal, it will warrant a lot of
phone/call time.
A set of noise cancellation headphones that make their sales calls better, a new ultra-wide
monitor or a subscription to a wellness program to help them meditate and focus would
make for great reward options. The only limit on incentive options is your imagination.
Goals: The main aim of SPIFs is to meet sales goals for a particular product or service
quickly. In addition, SPIFs increase channel partner engagement and help boost low
performance. One can also use them to accelerate pipeline, finish old stock, support a
product release or take advantage of new market opportunities.
Challenges: There’s a chance that giving SPIFs can create unhealthy competition
amongst the partners. While some channel sales reps might try to get the most deals,
some might not even try much because of the program's competitive nature. There’s
also a chance that sales reps might not work beforehand in anticipation of a SPIF in the
future, which is called sandbagging.
Example: Samsung Mobile Valued Partner (MVP) Program was designed for Mobile B2B
resellers to build shared momentum, empower Samsung’s mobile business partners with
innovative technology and solutions, and help them create more significant sales
opportunities.
Samsung MVP program partners are eligible to receive numerous benefits to help them
boost their business prowess. These include financial incentives such as target bonuses
(SPIFs), market development funds, promotions, access to online and offline training.
3. MDFs (Marketing Development Funds)
Marketing Development Funds are incentives rolled out to channel partners to increase future
sales by creating brand awareness. Unlike other incentive programs, MDFs are provided in
advance to selected partners who agree to use the said funds for the specific purpose they’re
allotted for.
These funds are generally allocated for channel partners to perform specific ancillary
marketing activities. These could be developing marketing materials like email lists or
organizing educational and lunch-and-learn events.
Goals: The goal of MDFs is to help partners build sales and marketing campaigns to
increase brand awareness. An ancillary goal is to build a trust factor between the
business and its partners. If used correctly, MDFs can make developing strongholds
in local markets easier.
Challenges: An MDF is an investment in a plan that a third party executes. So, it
becomes difficult to monitor the use of the money rolled out. Estimations can go
haywire; execution of the plan may cause changes in the use of the MDF. It’s almost
like placing a bet with no certainty about the outcome.
Example: LG, an electronics and home appliance company, provides its channel partners
with support at every step. They help them expand their market during demand generation,
pre-sales, and post-sales.
4. Rebate incentives
A rebate is a refund or a money-back. Businesses encourage channel partners to increase their
orders of products or spend larger amounts of money investing in stock from these businesses
by offering rebates. Rebates are rolled out either as refunds or in the form of rewards or
points.
Rebates are one of the oldest and arguably one of the most effective forms of incentivization.
But changing times call for innovation in rebate programs, and here’s where we can help
you transform the rebates and refunds game.
Goals: Like all other incentives, the primary purpose of a rebates program is to
increase sales quantity, in this case, specific products or services. You can also use
rebates to encourage data collection that helps businesses create more effective
marketing strategies in the future.
Challenges: Management of rebate and reward programs are a challenge for
companies. Unless a well-functioning solution is in place, running an effective program
is almost impossible. The other side effect of rebates is the likelihood of unhealthy
competition between the partners.
Example: Amway, an FMCG company, is dependent on its vast network of channel partners.
Its rebate program is very simple, straightforward, and effective. It is a two-pronged program
where partners receive a specific percentage of sales that they have made as rebates and enjoy
rewards from a point system.
5. Co-operative marketing funds
Co-op marketing funds are reimbursement of costs incurred in conducting a marketing initiative -
usually shared by the company and channel partner. MDFs are a pre-initiative incentive, whereas
co-operative marketing funds are given out after completing the marketing activity.
Goals: A cooperative marketing fund aims to get both parties (e.g., distributor and
partner) equally devoted to a common goal. The common goal is market expansion.
Challenges: An understanding and an element of trust is a must to run a successful Co-
Op Marketing Fund program. If there is no understanding between the two, rolling out
funds after the program could lead to a strained relationship.
Example: Huawei is a leading electronic manufacturer. It offers a well-structured program
for its sales and service partners that combines different types of incentive programs. One of
the offerings in the program is cooperative marketing funds to help partners in lead
generation.
6. Deal Registration Incentives
The incentives that are tied with the size of the deal are called deal registration incentives. It gets
difficult for sales teams and channel partners to push sales on high-cost products.
In such cases, deal registration incentives can effectively motivate partners to make sales. The
more conversions or deals registrations sales reps can make, the higher their incentives.
Goals: Encouraging on-ground sales reps is the primary goal of this kind of program.
Incentivizing with money is a great way to keep sales reps engaged and motivated.
High-worth incentives give partners a reason to participate and give their best.
Challenges: Since deal registration incentives are targeted at and work best when
rolled out to individuals who make the sale happen, it can get hard for the business to
keep track of the deserving candidate and ensure that the incentive reaches the right
person. Another possible challenge is the change of hands or roles that can occur
during the deal registration process where it becomes difficult to identify and attribute
the deservedness of the incentive to one person, making participants reluctant.
Example: Monte South, a real estate company, has a very straightforward deal registration
program. They give a fixed percentage of commission on a specific number of deals.
7. Value-added reseller incentives
Value-Added Resellers (VARs) Incentives are rolled out to channel partners to allow them to
add an extra feature, product, or integration to improve an already existing product - yours -
as a part of their resale activity. These value-added products become a ‘one-stop solution’ for
customers’ needs. Adding value at the sales level helps encourage the purchase.
Goals: Your on-ground channel partners have the best view of the market and
customers. By incentivizing partners to add value to your product, you are working to
increase your stronghold over a particular market. The creation of product and brand
enthusiasm is another goal of VAR Incentives.
Challenges: Creating trust with Value Added Resellers becomes a challenge. Allowing
another company to add value to your product means extending freedom. Running a
VAR program means having intermediaries involved. Such incentive programs
decrease profit margins and may not be as lucrative as other incentive programs. If
gathering customer data is a goal, acquiring that information from VARs is a trade
secret they may not want to share.
Example: TTAP - a Singapore-based subsidiary of Toyota, a car manufacturer, needed a new
platform to connect real-time car data. They partnered with a Value Added Reseller (VAR)
called Techblocks to get the technology. Here’s a case study to help you understand TTAP’s
requirements and see how Techblocks fulfilled them.
8. Referral incentives
As the name suggests, when channel partners identify and refer potential customers, you can
reward them with referral incentives. Referrals add credibility that encourages purchase.
Goals: Referral incentives have a twofold objective. The first is to encourage channel
partners to act as brand ambassadors. The second is to give you more customers and
sales. After all, word-of-mouth referral is the most powerful marketing tool.
Challenges: Efficiently tracking referrals and rolling out incentives can pose a
challenge. Running a referral incentive program is also capital-heavy. A business must
have enough revenue to invest in to ensure growth.
