We all know the power of incentives. In any situation they’re powerful, but perhaps nowhere as much as when you want your channel/dealers to enthusiastically sell your product.
For companies dealing in physical goods, creating an effective dealer incentive program is essential for driving sales and fostering strong partnerships, so in this article, we’re diving into the practicalities of building your perfect dealer incentive program.
*If you have a software product being sold through resellers or affiliates the dynamics are a bit different and we have an article just for you coming soon!
Without further ado, let's explore how to tailor your incentive strategy to maximise sales through your product distribution channels.
Understanding incentives
In the world of sales, incentive programs promise a lot: boosted dealer productivity, growth, and increased profits.
But beneath the surface of this seemingly straightforward concept lies a multitude of questions and considerations:
What exactly should be incentivised? Is it sales, growth, or meeting specific targets? Should the focus be on driving immediate revenue or fostering long-term success?
Equally, what should you offer as a reward? Should it come in the form of cash incentives, favourable trading terms, or branded merchandise?
And then there's the question of who should be the target of these incentives. Should dealer managers be the primary recipients, or is it more effective to target frontline staff?
Each option carries its own set of implications and impacts on dealer engagement.
While it might be your first instinct to file the issue away in the ‘too-hard basket’, hang in there! Kademi has been doing this every day for years and we have all the answers you need. Read on!
Do you need software?
Incentivising and rewarding those responsible for making sales is as old as commerce itself. In fact, you’re probably already running an incentive system of some kind with spreadsheets and email. So when should you invest in a software solution to manage that process?
Here’s why investing in software for your incentive program is an important strategic move:
You’ll more fully engage programme participants: Software lets you maximise participant involvement and drive optimal results. From tracking progress to providing real-time feedback, to automating follow-ups and other tasks, the right incentive software ensures participants remain actively engaged throughout the program.
Influence behaviour as targets near: A static, one-size-fits-all approach that isn’t responsive to the particular circumstances of a dealer doesn’t provide anywhere near as much emotional pull as a system that can point out when targets are close to being achieved and encourage dealers and their salespeople to stay the course. Whether it's providing additional reminders, personalised messages encouraging continued effort, or tips to better achieve sales goals, the right software solution’s targeted interventions are designed to drive performance.
Facilitate communication: Communication with participants is key. Through automated and personalised newsletters and updates, you can stay front-of-mind throughout your incentive campaign, communicating important information and fostering ongoing engagement.
Who to incentivise?
So who in your dealer network should you target? The choice of target audience will largely depend on your specific goals and objectives.
Managers/Owners: Incentivising managers and owners can be highly effective. Offering bigger incentives and setting annual targets can motivate them to actively engage with the program and encourage their teams to do the same. Securing buy-in from managers is essential for the success of most incentive programs, as they play a ‘gatekeeper’ role to sales staff and can drive participation on your behalf.
Staff: Targeting sales staff with simple, transactional incentives such as SPIFF (Sales Performance Incentive Fund) programs can yield significant results. When a sales assistant makes a recommendation, most of the time customers will take that recommendation. This gives sales staff huge influence over customer purchasing decisions, so by directly incentivising workers at the point of sale you can effectively drive sales.
Your employees: Don't overlook the importance of incentivising your own sales team! Your internal sales representatives are just as responsive to incentivisation as anyone else, so run your own internal incentive program, bring them into alignment with your goals, drive results and walk your talk!
What to incentivise?
So what makes a good incentive? The answer is, it depends - on your business objectives and the specifics of your dealer network. Only by aligning incentives with specific goals and offering rewards that resonate with your dealers, you can drive motivation, engagement, and ultimately, sales growth.
Here are the options to consider:
SPIFFs: Sales Performance Incentive Funds are rewards for achieving a short-term goal. They are powerful motivators, directly incentivising sellers at the point of sale to move your product. While highly effective in promoting immediate action, the cost of SPIFFs can add up, especially if you’re dealing in markets or with products with thin margins. SPIFFs work best in high-margin categories - exciting new product releases - where the additional cost is justified by increased sales.
Sales targets: Offering your distributors percentage price reductions off wholesale or incentives based on total sales per month, quarter, or year is effective for motivating managers and owners. Offering percentage price reductions in return for high-volume sales is a great way to activate managers and their teams to enthusiastically promote your products in-store. Coca-Cola, for example, uses this approach to world-beating effect, ensuring that its products are prioritised and proudly displayed at the point of sale.
Growth percentage targets: Setting targets for a particular growth percentage, such as achieving a 5% increase relative to the same quarter last year for example, is a great way to incentivise dealers over the long term, especially on items with narrow margins.
Personalised targets: While tailoring individual targets to each dealer's specific circumstances requires more effort to manage, it does ensure that incentives are properly aligned with each dealer's unique goals and challenges - ultimately providing greater participation in your programme across disparate businesses.
Leaderboards and recognition: Leaderboards ranking dealers by growth or total sales can foster healthy competition and motivation within your dealer network. Particularly useful for end-of-year conferences, recognising top performers encourages dealers to strive for excellence and can drive the overall performance of the whole organisation.
Simply put, align your incentives with your goals and make sure you’re offering rewards that resonate with your dealers.
How to reward?
Question: Is cash king when it comes to incentivising salespeople?
Answer: Sometimes, but not always.
Here’s why:
Cash: While cash incentives are universally appealing, they can be costly (you bear the full cost of the reward) and they’re highly ‘transactional’- appreciated in the moment, but easily forgotten.
Gift cards: Similarly, gift cards are convenient, logistically easy and almost as coveted as cash. Gift card-based rewards can work out slightly cheaper over the long run, thanks to redemption rates below 100%.
Merchandise: Who doesn’t love a top-of-the-line coffee machine? Offering such items as a reward for strong sales performance is a classic strategy, providing positive associations and ongoing reminders of your brand.
Dealer discounts and rebates: Providing dealer discounts and rebates at the manager level is a great way to promote loyalty among dealers.
Conference upgrades: Offering recognition and luxury accommodation upgrades during conferences to top-performing dealers is a great way to incentivise salespeople. (More on this below).
Pulling it all together
As you see, creating a successful dealer incentive program is about aligning your incentive structures with your business objectives and target audience.
Here are some suggestions on how to do that:
If you’re a challenger or entering a new market…
…you’re probably up against incumbent brands and you need to onboard new stores/distributors. So you need powerful incentives at the dealer level to get them to stock your product and push their team for sales, and you need to incentivise the staff to learn about your products and deliver sales.
Running a generous incentive program in a modern dealer portal with e-learning and resources positions you as a great brand for dealers to work with, and will help you bring on board new dealers.
For managers: use a quarterly tiered structure with discounts as the reward. Agree on expected quarterly volume targets, and give each dealer the level based on what they expect to achieve. If, at the end of the quarter, they’re below agreed targets then they drop back a level.
Eg:
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100 units/quarter: 10% off list price
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200 units/quarter: 20% off list price
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500 units/quarter: 30% off list price
Use your sell-in data, ie stock you sell to the store to calculate results
For staff: Run a SPIFF program on your most important products. For example, if a product retails for $1000, you might offer a $20 reward for each sale. Use AI-based receipt scanning to register for awards based on actual sales with proof of purchase. This will also give you intel on what other products your dealers are selling, as well as confirmation of the retail price!
Payout as either gift cards (like Prezzee) or through a card funding process (XTRM.com) if many users are regular earners.
If you’re maximising growth from a mature channel…
If you already have a mature and stable network of distributors and dealers your objective should be to get the best possible sales results from them.
However, in a mature market margins are likely constrained, so it can be difficult to come up with generous incentives for individual sales. Instead, focus on your incentives where you’ll get the most bang for your buck: growth.
For managers: Use growth targets, where the incentive cost is entirely determined by sales above baseline. No growth = no incentive! Measure from sell-in data, and payout as a rebate on orders.
For staff: Use SPIFF incentives with AI-based receipt upload, but for promotional products only. Run monthly or quarterly promotions for specific products, ideally tied with consuming-facing in-store displays. Kademi Incentive Software supports this low-touch approach.
Be sure to combine this approach with product training tutorials linked to your incentive programme. Remember: knowledge-based influence on the shop floor has by far the biggest ROI!
If you’re running an annual dealer conference….
…then leverage that event for your manager incentives!
We suggest running two leaderboards, one for total annual sales and another for annual growth.
For each leaderboard, grant the top spot (or spots) special recognition at the conference, and offer an exclusive or luxury reward, such as a free upgrade to a VIP suite.
Final word
With a tailored strategy and effective Sales Incentive Software, you’ll be well set to engage.