Believe it or not, most incentive programs are completely unsuccessful.
In the spring of 2020, SiriusDecisions (now part of Forrester Research) surveyed1 more than 10,000 business leaders to determine the state of channel partner incentives. The resulting research brief revealed that only 5% of incentive programs fully achieve their objectives and only 37% achieve some of their objectives. Another way to read the figures is that a staggering 58% of all incentive programs fail to achieve any of the objectives. With such results, it is baffling that companies continue to invest in incentive programs at all.
It also urges the question of how you should proceed as you prepare your budgets and marketing plans for the coming year: should you stop doing partner incentives entirely, or instead, look for ways to improve your programs?
To find the root cause, you have to ask “why?” (and not just once).
Ninety years ago, Japanese industrialist Sakichi Toyoda invented the “5 Whys” technique to identify the root cause of any failure: ask “why?” five times, and, by progressively answering the questions, you will find the source of the problem. By understanding the root-cause you will be able to identify countermeasures that can drive improvement. Let’s apply this technique to partner incentive program failure and see what it yields.
Why #1: Why do most incentive programs fail to achieve the desired objectives?
There are at least two answers, and each one will open a different path of questioning.
- Programs may fail because many partners do not engage to start with. 17% of survey respondents indicated low partner participation rates. Of course, no objective can be attained if partners do not participate in the first place.
- Programs could also fail because the stated objectives are unattainable from the outset.
Assuming, however, that companies have set realistic goals, we arrive at our level-two inquiry.
Why #2: Why don’t partners participate in the incentive programs?
Again, two reasons rise to the top:
- Partners don’t find the incentive programs attractive. 19% of the respondents to the SiriusDecisions survey reported that existing programs simply do not motivate partners.
- Program engagement is too complex. The SiriusDecisions research brief remarks that many incentive programs are marred by “complex program rules and lengthy approval and claims processes” which partners find challenging.
If we follow the first potential explanation, we go deeper into the heart of the challenges partners themselves face.
Why #3: Why are programs unattractive to partners?
- It could be that the programs are good, but the partners do not understand the benefits of participating. As the research brief notes, sometimes “suppliers do not provide clear vision of what is in it for the partner.”
- It could also be that programs are boring, uninspired and lack relevance for the partners. In a webinar run jointly by e2open and SiriusDecisions, the speakers highlighted the fact that partner ecosystems have evolved in recent years and questioned whether incentive programs keep up with the changes. Are current incentive programs reflecting the partner’s business model and stage in the engagement with the brand?
Taking the first potential barrier here—the possibility that partners simply don’t understand the power of the programs they could be using—we arrive at our level-four inquiry.
Why #4: Why are partners failing to recognize the value of incentive programs that should be attractive to them?
The most likely scenario here is that there isn’t a mechanism to communicate the program value in simple terms. It could be that the partners do not have an easy way to visualize the accrued benefits from the incentive programs they take part in. They may not have access to simulations of what they could earn by participating in the programs, nor the visibility to the market development funds available to them and the terms under which they can participate. And if partners aren’t understanding the value of incentive programs, the last of our five “whys” emerges automatically.
Why #5: Why isn’t there a mechanism to communicate the program value?
There’s no clear communication to partners of the benefits of these programs because a large part of the incentive processes is handled manually, via spreadsheets or through a smorgasbord of disconnected tools. The survey reports that a worrying 30% of respondents lack any basic technology solution to facilitate the management of incentives, including communication to partners.
Navigating the questioning paths
Other paths of questioning will prompt more questions and answers, such as the following.
Why are the programs’ objectives unrealistic? Well, there are many possible reasons. For instance, the programs may be static, and their objectives do not account for changes in the business circumstances that make it impossible to accomplish the original goals. It could also be that the programs measure metrics that do not reflect what we want to achieve with the program.
Why don’t we adapt the objectives of programs that are already in progress? Possibly because it isn’t always clear when changing business dynamics necessitate changes to the objectives and the overall program. Another potential reason is that we simply cannot change the programs fast enough to keep up with changing business conditions.
Why isn’t it clear when changes to our incentive programs are needed? Because we lack the data to tell us that the objectives are no longer achievable, or even relevant. Possibly we are tracking the wrong metrics for the programs. Another potential reason is that we track the metrics that we can rather than the metrics that we need. According to the survey, 60% of participants are “unable to measure ROI by partner type, tier, or geography.” This is a surprise, considering these are the exact metrics that would make it clear if the programs are successful.
Why do we measure what is convenient rather than what we should? In other words, why aren’t we able to measure the ROI of existing programs? Perhaps because we manage the incentive programs manually or use disconnected technologies that fail to capture and track the data that we need to understand and manage program performance.
Why is our incentives technology infrastructure inadequate? Most likely because we do not have a clear picture of what the right infrastructure should be, and we have not budgeted for it.
The list of questions and answers above is by no means exhaustive. Many more questioning paths could be added. To help you navigate the 5 Whys technique, here is a logical cause and effect visual with the two paths we went through above highlighted in yellow and gray, respectively.
There are several possible resolutions to the fifth “why” on each questioning path. However, all of the potential lines of questioning as to why incentive programs fail can be reduced to a common theme: to reap the benefits of your incentives spend, you need to invest in technology. That’s why, as you plan your channel marketing for next year, you should make sure to budget for the right incentives infrastructure.
Look out for the next blog in this series to learn about the channel incentives technology stack and what could be the right incentives infrastructure for you.