Using Incentives & Compensation Programmes to Drive Sales in the Channel.
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The signing of the contract with a distributor is just the start of the relationship with your new international partner. You have done all the due diligence on the partner and you believe them to be the right partner for your organisation. Developing a relationship and building trust is a slow process and involves many different activities, including training and channel marketing, however incentives for the distributor’s sales team and rebates for the distributor have long been used to drive sales but in reality, do they drive sales? Absolutely, if the programmes is a good one and well implemented.
Generally, distributors’ sales teams have many products and the challenge for any company is to ensure that your products are at the top of their pile. In reality, incentives only work if you combine them with other elements such as training and support. In my career, I have had distributors who have worked with blue-chip companies and had my products as an alternative. The incentives that the blue-chip company could offer were far superior to mine so why did my incentives work. Firstly because I ensured that all the sales team were fully trained on my products, secondly that I worked with them, I supported them in the field and I answered any queries quickly and finally because the incentive programme that I had created targeted all the sales team.
Incentive programmes have a tendency to target the high achievers with great prizes and generally these salespeople do really well but in reality, they would do really well whatever the incentive is as they are born to overachieve. Please do not think that I believe that these salespeople should not be rewarded but incentive programmes need to incentivise the whole sales team or otherwise your programme will fall short as it will not drive sales to the level that you had forecasted.
Work with the sales manager to agree to a target. Ensuring that you get the required growth, will ensure the buy-in of the sales manager who in turn will motivate the sales team. The incentive plan must give the weaker salespeople a chance to win and that they feel that the goal is achievable. Multiple prizes are generally the best as it encourages all the team to meet their targets and helps avoid apathy and the feeling for some of the sales team that it is pointless to even try and meet the target as the usual suspects will naturally win the prize.
Incentives are a great way to continuously keep in contact with the distributors’ sales team. It allows you to email them on a more frequent basis, telling them how they are doing. These emails can also be used to give the distributors’ sales team information on new products etc. The result is that not only are you building a relationship with the distributor but also with its sales team. This communication allows you to reinforce your company’s brand with the distributor’s sales team.
Rebates are really useful to get the attention and focus of senior management and to get them to drive the sales of your products but they have little effect on the sales team and should not be done in isolation as it can alienate the sales team as they get all the pressure from senior management to perform but none of the rewards. For example, I worked for a company whose founder had just sold it and he was to get US$30M if the company achieved certain targets from the new owners and for 2 years all we heard was that we couldn’t spend much money and we had to get x amount of sales in order for the founder to get his US$30M. A year into this push, the sales team asked why were we doing all of this. What’s in it for us? You might say – a job. But in reality, this drive to meet certain targets so that the founder could get his bonus was futile. One of the key drivers (not the only one) for salespeople is the monetary reward. Rebates on their own can be self defeating as the focus is on the distributor whilst the pressure is on the sales team to deliver but with no extra reward.
Create an incentive plan that encompasses the whole sales team and which will motivate all the sales team and which will also drive sales. Combine the rebate with an incentive. The rebate will possibly have to be lower but there is a greater chance of the target being meet and the rebate being paid. Incentives give a company a good opportunity to communicate with the distributors’ sales team and increase brand awareness and keep your brand at the top of their minds. Incentive and rebates can drive sales with your international distributors but they need to be well-thought-out and naturally meet all cultural and legal parameters.
If you are looking to create incentives and compensation programmes for your international partners and are looking for best practices contact sales@openventuresconsulting.com