Monetary Partner Incentives Shouldn’t Be Your First Move

Rather than reaching for incentives and money to motivate partners, partnership leaders should focus on the things that remove friction from the go-to-market relationship.

By Larry Walsh

Ask any partner what it would take to get them to do more business with you and the first word out of their mouth is money. It’s always money — deeper discounts, richer deal registration, and fatter and easier back-end rebates.

In survey after survey conducted by Channelnomics, partners always point to the endemic monetary rewards and incentives as the chief motivators of their business activity with a vendor.

Consequently, channel professionals, sales leaders, and product managers will frequently reach into their pockets to find money to entice and motivate partners to move more products and services — particularly in a given quarter.

Vendors have two choices when motivating partners: add fuel or remove friction.

Fuel is the monetary incentive poured into the go-to-market engine that provides the energy to propel sales.

Friction slows down go-to-market activities. If you remove friction or grease the engine, your processes will flow easier and faster. We’re talking now about the oft-cited “ease of doing business.”

Of course, pouring money on problems is always a good solution (note sarcasm), but the reality is that partners respond better to the removal of friction. Channelnomics analyzed thousands of partner data points on their interactions with vendors. While monetary rewards are an important motivator, the factors that influence ease of doing business impact partner performance.

Partners tend to gravitate toward vendors that are easier to do business with even if they’re less profitable. As the old saying goes, time is money. If a partner can sell a vendor’s product faster, even if it generates less cash, they’ll engage more because they can increase volume.

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Suggested Reading

• Ease of Doing Business: A High-Value Influencer
• Money Isn’t Always the Biggest Partner Motivator
• The Vendor-Partner Disconnect
• You Can Hike Prices Without Aggravating Partners

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Consequently, vendors that are more difficult to do business with — those that put up too many roadblocks in their programs, make sales processes more cumbersome, and generally take longer to support opportunities — often have to pay partners more in compensation and incentives.

Vendors know this intuitively; they all talk about the idea of making business easy. Ultimately, vendors would rather not pay partners any more than necessary, so removing friction always sounds like a better approach to motivating partners.

In practice, however, vendors — always under pressure to lower the cost of channel engagements — will resort to pulling compensation and incentive levers to get partners to sell. It’s easier and faster to throw a couple of bucks at a partner than to revamp configure, price, quote (CPQ) and customer relationship management (CRM) systems.

While channel leaders will precisely calculate how they can provide some points in their discounting and rebate models to incent partners, they’re often blind to the other money flowing in partners’ direction as regional teams, marketing groups, and product managers run promotions or create side programs that add funds to partner coffers.

Juicing partner incentives and compensation may produce short-term returns, but it rarely solves systemic problems. The issue with acting on partners’ desire for higher compensation is that money never lasts. At some point, vendors have to pull back on their incentives, which causes friction (read agitation) with partners.

Vendors looking to get more out of their channel programs and partners should put adjusting incentives last on the list of considerations. Instead, they should focus on what makes partnerships work better — faster engagement times, easier access to support and resources, shared market and customer intelligence, expedited quoting, better communications and collaborations, and well-defined total economic opportunity.

Only after examining the factors that remove friction should channel program managers reach for their wallets to dole out more money.

In future blogs, we’ll discuss other factors influencing partner performance. Optimizing partner relationships and performance isn’t easy. Short-term cash infusions only make motivating performance over the long haul harder.

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