As Shelley wrote last month, managing channel partnerships can really be a struggle for marketers, from correctly communicating your value proposition to end customers to selling your product over those of your competitors. Tackling these challenges is becoming increasingly difficult in today’s world, with many marketing budgets facing limitations (thank you, flailing world economy!).
This is particularly true for the incentives piece of the equation. CEB research has found that only 15% of channel partners sell for only one supplier, which means that the other 85% is choosing between you and your competitors. How can marketers influence and motivate channel partners to prioritize selling their products when they can’t offer the highest sales-volume-based rewards?
We at MLC are currently working on a research project to answer that question, which is coming your way in early December. In the meantime, I want to share a few findings from the Enterprise Council on Small Business, one of our sister CEB programs. They surveyed over 200 channel partners to better understand supplier-channel partnerships.
When making product recommendations, your channel partners rank “rewards” fourth in importance. Less than 10% of respondents listed sales commissions as the primary reason for recommending one product over comparable others. Instead, over 70% prioritized these three motivations:
- “It is the best fit for a customer’s needs.”
- “The customer demanded the specific product/brand.”
- “I have the best relationship with the supplier.”
This has several implications. First, if you are a supplier who already falls under one of those categories, your channel partners are probably going to sell for you anyways because that’s their most effective path for profit. That means you don’t need to spend as much on monetary rewards.
Second, if you don’t fall under one of those categories, then in order for your sales commission to be effective, it would have to exceed the value of satisfying customer demand. Intuitively, since satisfied customers are more likely to result in future new and repeated business, the combined value is too high of a bar to meet. That means spending more on monetary rewards probably won’t do much to boost sales.
Third, remember that when it comes to relationship building, and I’m talking about any kind of relationship, money can’t buy love… which brings me to my next point.
In your channel partners’ eyes, “ease of doing business” is the most important component to your relationship. ECSB asked those 200 channel partners to rate the importance of 30 different components of a partnership. Five of the top six components had to do with making the channel partners’ lives easier (e.g., access to the full product line, reliability of supplier delivery, quality of communication with the supplier, advanced notice of new products, and flexibility of the supplier with ordering).
This makes sense: your channel partners are people too, and people like to save time as much as they like to make money. If selling your competitor’s product means saving 30 minutes of paperwork or phone time, that’s 30 extra minutes with the kids (or at happy hour). Unless your commission can compete with that, you’re likely losing out.
The bottom line: money may be the icing on the cake, but it doesn’t make the cake. Make sure you understand what your channel partners want before you try to incentivize them, or you may be wasting your efforts.
As I mentioned, we’re still in the process of digging into this topic, and we’re hoping to deliver some solutions by mid-December. If you have ideas on the subject, or would like to take our benchmarking survey, we’d love to hear from you! Email me if you’d like to get involved, and we’ll reach out to schedule a call.