Channel incentives: How to grow sales through partners

Channel incentives drive sales and boost partner engagement. One study found that a well-structured incentives program can increase sales by as much as 44%.

But creating an effective program isn't always straightforward. 

This guide breaks down everything you need to know about channel incentives, from the basics to implementation to strategies for maximizing your ROI.

What is a channel incentive?

Channel incentives reward partners who sell or promote your company's products or services. These partners could be distributors, resellers, or other intermediaries in the sales process. 

The goal? Motivate partners to prioritize your offerings and hit specific targets. Channel incentives align partner objectives with company goals, fostering stronger relationships and driving growth.

Why channel incentives matter

Commissions are a powerful motivator for full-time, in-house sales reps. But channel incentives motivate external partners to prioritize and push your company's products over your competitors' products.

A channel incentives program can help your company:

Accelerate growth

Channel incentives can significantly boost sales and revenue. By providing compelling rewards, you motivate partners to actively market and sell your products. This increased engagement often leads to improved sales performance and notable revenue growth.

On average, only 47% of B2B sales reps hit their yearly quotas. But, according to an Aberdeen Group study, B2B companies with well-designed channel incentive programs see 83% of sales reps reach or exceed their annual goals. 

Enhance brand awareness

Channel partners become enthusiastic advocates for your products when properly incentivized. This advocacy creates a ripple effect, triggering word-of-mouth marketing and expanding your brand's reach to a larger audience.

Improve partner retention

Channel incentives foster loyalty among your partners. When partners see direct benefits from their efforts, they're more likely to remain committed to your brand. This reduces turnover and strengthens long-term partnerships.

Gain competitive advantage

In crowded markets, channel incentives can set you apart. They give partners a reason to prioritize your products over competitors. This edge can be crucial in securing market share and driving sales growth.

Types of channel incentives

Channel incentives come in various forms. Each type serves different purposes and can be tailored to specific goals. Here are some common types:

Sales Performance Incentive Funds (SPIFs)

SPIFs are short-term sales incentives designed to boost sales of specific products or services. They offer immediate rewards for hitting targets within a set timeframe. SPIFs can be particularly effective for launching new products or clearing out inventory.

Market Development Funds (MDFs)

MDFs support partners' marketing efforts. These funds can be used for advertising, trade shows, or other promotional activities. MDFs help partners generate demand and leads for your products.

Channel rebates

Rebates offer partners a percentage of sales back after reaching certain targets. They encourage ongoing product movement rather than one-off purchases. Rebates can be particularly effective for driving long-term sales growth.

Training and certification incentives

These incentives reward partners for improving their product knowledge and skills. They might include bonuses for completing training programs or achieving certifications. This type of incentive ensures partners are well-equipped to sell your products effectively.

Deal registration incentives

Deal registration programs reward partners for bringing in new leads. They typically offer increased margins or other benefits for registered deals. This incentive type helps prevent channel conflict and encourages partners to actively seek new business.

Ways to use channel incentives

Incentives are used to motivate all types of distributors, resellers, retailers, and agents. Here are just some of the potential use cases for channel incentives and ideas for how you can structure your program.   

Tech sales

Let’s say a computer hardware manufacturer wants to boost sales of its new high-performance graphics cards through its network of distributors.

The manufacturer implements a three-month SPIF program with tiered rewards:

• 50 units sold = $500 bonus

• 100 units sold = $1,500 bonus

• 200 units sold = $4,000 bonus

Additionally, the top-performing distributor in each region receives a $2,000 reward.

The tiered bonuses encourage distributors to aim for higher sales volumes, while the regional reward creates healthy competition among top performers.

To maximize effectiveness, the manufacturer can provide comprehensive product training and marketing materials to distributors. 

Medical supply sales 

A medical supply company launching a new insulin syringe could use channel incentives to penetrate the market quickly. To incentivize their distributors, they set up a six-month program with monthly targets:

• 10% increase in syringe sales = $1,000 bonus

• 20% increase = $2,500 bonus

• 30% increase or more = $5,000 bonus

This approach combines immediate cash incentives with long-term benefits, encouraging distributors to consistently promote the new product line. 

SaaS sales

SaaS sales A cloud-based accounting software company aims to expand its small business customer base through its network of value-added resellers (VARs).

They create a quarterly incentive program: 

• 5 new small business subscriptions = $300 bonus 

• 10 new subscriptions = $750 bonus 

• 20 new subscriptions = $2,000 bonus

To further incentivize sales, the company offers channel rebates. VARs receive a 5% rebate on all sales up to $50,000 per quarter, increasing to 7% for sales between $50,000 and $100,000, and 10% for sales exceeding $100,000.

The tiered bonus structure provides immediate rewards for hitting specific targets, while the rebate program offers ongoing incentives for increased sales. The combination of short-term bonuses and long-term rebates creates a balanced approach to motivating VARs throughout the sales cycle.

By tailoring channel incentives to specific industry needs and partner roles, your company can drive significant indirect sales growth. Just be sure to reinforce the value of relationship building when you incentivize quick wins.  

How to create channel incentives

Creating effective channel incentives requires careful planning and execution. Here's a step-by-step approach:

Define clear objectives

Start by identifying what you want to achieve with your channel incentives program. Are you looking to increase sales of a specific product line? Expand into new markets? Improve partner engagement? Clear objectives will guide your incentive structure.

Understand your partners

Different partners may be motivated by different incentives. Take the time to understand your partners' needs, preferences, and pain points. This insight will help you design incentives that truly resonate.

Design the incentive structure

Based on your objectives and partner insights, create a sales incentive structure that aligns with both. Consider factors like:

• Reward types (monetary rewards, non-monetary rewards, points)

• Performance metrics

• Tiered structures

• Payout frequency

Keep the structure simple and easy to understand. Overly complex programs can confuse partners and reduce engagement. 

Communicate clearly

Once you've designed your program, communicate it clearly to your partners. Explain how the program works, the KPIs required to earn incentives, and how rewards will be distributed. Clear communication ensures partners understand and engage with the program.

Implement and track

Don’t waste your time sending incentives manually and tracking every payout in a spreadsheet. Use a reliable system to implement and track your channel incentives program. Tremendous makes it easy to send channel incentives and track your payouts in real-time. 

Review and adjust

Regularly review your channel incentives program. Are you meeting your objectives? Are partners engaging with the program? Use these insights to make adjustments and keep your program effective over time.

Sending channel incentives with Tremendous

Channel incentives shouldn't be a headache to manage. Tremendous makes it simple to send rewards and track payouts, all from one platform.

With Tremendous, you can offer external partners over 2,000 reward options across 200+ countries. Whether your reps prefer gift cards, prepaid cards, or direct deposits, they'll always get the exact incentive they want.

Plus, we make it easy to scale and expand your program as needed. Use Tremendous to send 100 or 1,000 channel incentives at once. Then, monitor all your payouts in real time from a single dashboard.

Tremendous even helps you automate tax compliance. We automatically send W9 forms to reps who receive more than $600, so your finance team can focus on more important tasks.  

Ready to supercharge your channel incentive program? Sign up today or book a demo to see Tremendous in action.