If you’re familiar with the world of incentives, you know that incentive programs and performance improvement solutions generally are designed with specific goals in mind. These goals, in effect, are challenges that the right incentive program is designed to solve. In this way, incentive programs have the potential to offer significant value to your channel relations if done right. They can, for example, help you overcome the challenge of a competitor pricing war by providing a unique alternative that builds upwards rather perpetuating a race to the bottom.
But as we know, businesses often face challenges like this on multiple fronts, and finding a solution for one particular problem can simply mean another one pops up, like a game of whack-a-mole, in a different location. As a wholesaler, for instance, you might be able to implement a channel relations strategy that enables you to generate more mindshare amongst your network of independent contractors. But then you may realize that your sales team isn’t paying attention to enough of their customers, limiting the effectiveness of the original solution.
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Part of the challenge is that a distribution channel is a complex ecosystem. Like any ecosystem, in a distribution channel there is an interdependence between all of the “organisms” that live in it. However, there are also some members of any given ecosystem that play a pivotal role in maintaining the balance within it. These are known as “keystone species,” which the Natural Resources Defense Council describes in this way:
A keystone species . . . is the glue that holds a habitat together. It may not be the largest or most plentiful species in [a] . . . community, but if a keystone is removed, it sets off a chain of events that turns the structure . . . of its habitat into something very different. Although all of an ecosystem’s many components are intricately linked, these are the [members] that play a pivotal role in how their ecosystem functions.
I don’t know about you, but to me that sounds like there’s a lot of pressure on these keystone species to keep their ecosystems running efficiently. In a way, it also makes me think of the position many distributors are in these days when it comes to channel relations. As a distributor, you have stakeholders both upstream and downstream whom you’re trying to work with and who rely on you to add value to them. Upstream, you have your relationships with manufacturers and suppliers who depend on you to move their products at an efficient clip. Downstream, you have contractors who rely on you to provide quality products at a fair price with great service, and even further downstream they have their own customers who rely on them to be successful in their business.
It would seem, then, that one of the questions you as a distributor are constantly trying to address is: “How do I tie in and add value to all of my key stakeholders in order to help them thrive?” Again, being a keystone species carries with it a big responsibility and solving the challenges that these key members face requires a solution that’s as dynamic and adaptive as the ecosystem itself.
Channel Relations: A Holistic Approach
This brings me back to the concept of an incentive program. Consider the specific business objectives a typical incentive program might try to achieve. It could be that you want to enhance customer loyalty, or maybe you’re trying to motivate your sales team. You might want to improve engagement among your suppliers, or gain mindshare with your channel partners. What can be hard to envision, however, is how you can accomplish more than one—or all—of these goals simultaneously without needing to juggle multiple diverging initiatives.
The truth is, an incentive program has this capability. You can enhance your business results and relationships with key stakeholders both up and down your supply chain without sacrificing efficiency or incurring prohibitive costs. It simply requires a more holistic approach to the planning and execution of your program.
A Hypothetical Case Study
For example, let’s imagine a refrigeration wholesaler that’s looking to initiate a holistic incentive strategy for their channel. Specifically, they want to figure out how they can pull in key stakeholders from three separate audience segments: their customers, their sales organization, and their suppliers.
The primary audience is their customer base made up of dealers. They want to give this group a reason to do business with them, so they begin by structuring the program so that these customers have specific numbers of quotes or “last looks” they need to achieve in order to earn points. These goals could be based on previous year or previous quarter numbers. From there, you could develop a channel relations system that gives the contractors an opportunity to earn rewards by achieving a certain number of quotes. These customers may also be presented with additional opportunities for earnings throughout the program, perhaps as short-term promotions.
The next audience segment is made up of territory sales managers, who our wholesaler wants to keep involved in the program and help contribute to its success. But to achieve this, these sales managers will need their own specific objectives and earning opportunities to keep the momentum of the program going. Maybe this means that in order to earn program rewards, each sales manager must get 50% of their customers to participate in the program. Or maybe each sales manager can receive points, awards, or recognition if 50% of their customers hit the goals that have been assigned to them. Or, maybe it’s something outside of points, such as an extra vacation day, a free lunch or other extrinsic reward. In this way, the sales managers’ goals in the program are directly tied to the goals of their customers.
Lastly, our hypothetical wholesaler wants to attract the engagement of their suppliers. They might also be looking for funding for the program in the form of a Marketing Development Fund (MDF) or co-op. But in order to get these suppliers to engage with them, our wholesaler needs to tie in some kind of value-add within the program. Fortunately, there are multiple ways this can be done.
They could offer the suppliers brand visibility amongst their customers and sales managers, with the suppliers’ logos, branding, and content housed on the platform and appearing on program websites and communications. They could provide product trainings, installation or compliance types of initiatives to dealers who choose the products of these sponsoring suppliers. Or they could offer higher, more valuable earnings to their customers if they purchase these sponsored products.
Ultimately, by using a more holistic approach, our wholesaler is now able to attract the attention, engagement, and dollars of its three primary stakeholders. What’s more, all of this is achieved by transforming a one-dimensional sales incentive or customer loyalty program into a multilayered strategy addressing these overlapping interests.
As a “keystone species” in the distribution channel, distributors are often faced with heavy responsibilities and complex challenges when building channel relations. But due to their unique position in this ecosystem, they also have opportunities to establish dynamic value-adds at multiple touchpoints throughout. This can be accomplished with the right incentive strategy.
As we’ve seen, when you’re able to tie in the various stakeholder groups in your channel, your program becomes more powerful and meaningful to everyone involved. What’s more, by taking control and designing a program that can create synergies between these key groups, you can also produce the all-important business results for yourself and your organization that these programs are meant to achieve. When done well, a holistic approach is about using a program as a sales tool and communication medium for your value proposition. What better way to remind your ecosystem of what sets you apart from your competitors than by offering them a program that speaks to their specific needs?
The question, of course though, always seems to be, “Can this be accomplished with a single incentive strategy?” With a truly holistic approach, we believe the answer can be: “Absolutely.”