Channel rewards programs that build partner loyalty

What is channel loyalty?

Channel loyalty is the foundation of a strong relationship between a company and its distribution channels. It represents a mutual commitment and trust between the two parties that drives mutual success within the supply chain.

This bond is essential for ensuring the smooth flow of products or services from manufacturers to end customers, as well as for maximising market penetration and profitability. By nurturing channel loyalty, businesses can leverage the expertise and resources of their channel partners to effectively meet customer needs and achieve sustainable growth.

So, how does it help companies grow?

Channel loyalty offers several benefits to businesses including repeat business, customer retention, increased sales as well as building an overall competitive advantage.

• Increased sales: Loyal channel partners contribute significantly to the bottom line by consistently spending more than newcomers. Their familiarity and trust in a particular brand prompts them to explore a wider range of products or services, resulting in larger purchases and higher sales volumes. This pattern of spending not only boosts average transaction values but also drives overall sales growth, providing a solid foundation for the channel’s financial success and expansion efforts.
• Customer retention: By fostering strong ties with a specific channel, b2b customers become less inclined to stray to competitors, thereby decreasing churn rates and maintaining a stable customer base.
• Repeat business: Loyal partners who consistently buy from a particular channel contribute to steady revenue streams, bolstering financial stability and growth. These repeat customers not only provide a reliable source of income but also increase their lifetime value to the business.
• Competitive advantage: Brands that cultivate high levels of loyalty among their strategic partners gain a significant edge over their competitors. By nurturing strong and enduring relationships built on trust, reliability and personalised service, these channels create a formidable barrier against rivals. Unlike businesses solely relying on price discounts or promotions, loyal long-term partners are less swayed by such tactics. Instead, they remain faithful to the brand they trust. This helps a brand expand its reach tenfold and creates a distinct position that is difficult for competitors to replicate.

6 Reasons Why Channel Loyalty Programs Matter

Strong channel loyalty presents a pot of gold for businesses operating via an indirect sales channel. Without loyalty – whether that’s loyalty from your own employees, from your customers, or in this case, from the resellers in your channel – your business is not on strong footing. No business should exist from one customer interaction, one marketing attempt, or one promotion to the next.

Think of it like a human pyramid, with you (AKA, your business) at the very top. You’ve got to be able to invest a certain amount of faith into the idea that every touchpoint in that pyramid are there with you; there to stay, and that nobody’s going to suddenly get bored, get up, and walk away, leaving a significant structural issue within any of the rows.

But this doesn’t have to be, and shouldn’t be based on blind faith. It should be built on tangible data, real results, and a long-term strategy to keep everything in place where its needs to be.

Channel loyalty programs can and do become one of the most worthwhile tools you can think about. A program that covers the entire length of the chain, rather than one particular link, will enable you to develop a robust loyalty framework that exists within the very core of your business strategy.

  Channel Loyalty Programs Boost Retention

Repeat customers are far more valuable than new customers. New customers only show value at the point-of-sale, while long-term, returning customers know you and your brand – your products and services – and what makes you unique and worth shouting about. This is why B2B retention is so vital.

In fact, of all the un-controversial, undisputable claims someone could make, ‘a high B2B retention rate is proof of a strong business that focusses on all the right things’ is right up there with ‘puppies make better company than alligators’, or ‘there’s always room for dessert’.

And, as we continue to demonstrate, rewarding loyalty is a great way to boost retention.

  They Grow Credibility

Your business can have the best branding in the world – a great, recognisable logo, a strong voice behind it, and a clear philosophy. But what gives you a sense of identity within your industry comes down to your customers.

Your identity grows with your ability to forge connections with customers. You want to be credible, and you want to be recognised and remembered.

This is vital, whether you’re operating directly with those endgame customers, or through an extended channel.

  They Create the Evangelists, Not Mercenaries

If you’re incentivising your channel through hot deals, sudden promotions, and highly competitive offers, you’re more than likely to see some pretty significant results. The catch? These results will have a big short-term impact – one that ends at around the same time as your deal, promotion, or offer.

Why? Because you’re not giving your customers any reason to stick with you. This creates the mercenary – the type of customer that you really want to avoid creating.

If you consistently work at creating those long-term reasons for customers to consistently shop from you, and not treat you like the flavour of the month, then you can work towards creating the evangelists – the customers who are passionate and enthusiastic about your brand, willing to spread the word to others, and genuinely invested in that long-term relationship.

Incentivesmart created a channel incentive program for Kärcher whereby distributors could develop their brand and product knowledge, as well as earn points on qualifying purchases. Three priorities were set to help achieve a successful engagement program:

1. Make access to the resources easier and more relevant to the dealer.
2. Create a two-way dialogue to capture requirements relevant to making the sales process simpler & easier
3. Use incentives to drive desired behaviours.

Click here to access the full case study

  They Ensure Channel Marketers are Informed and Passionate

There are many, many benefits to channel marketing, provided you can commit to mobilising that channel and taking full advantage of it. One of the best ways you can do this is not just through instilling a sense of passion about your brand throughout your channel (ultra-important, as we mentioned above), but also ensuring that your channel has the information they need to make more sales, and forge better relationships with customers further down the chain on your behalf.

A B2B customer loyalty program makes it possible for you to foster a stronger and more consistent relationship with your channel. It means you create those easy, welcoming points-of-contact that can help to boost education, awareness, and passion.

Ultimately, this improves the customer experience. Incredibly, less than half of organisations are thought to perceive customer experience as a competitive differentiator. That’s bonkers! If you can offer your customers a tangibly better experience than your competitors, you’ve got a real edge.

  They Give You Better Insight into Your Customers

This is particularly true of your closed group/membership only customer loyalty program, since you can gather an incredibly rich store of data as you work to boost loyalty.

The more insight you have into the entire length of your channel, the more you can hone your product range – lean into your USP and strengths, while improving any perceived weaknesses. You can understand the importance of providing clear yet specific product knowledge to give sales people the best chance to secure custom with confidence and credibility. And of course lets not forget how you can also utilise that all important data collected, to continue improving the program you offer, creating an invaluable cycle of actionable insight.

We all want to get to know our customers better, but it takes time and effort. It’s one of those things that just can’t be rushed.

Engaged customers aren’t just good for your point of sale. Research suggests that companies excelling at the customer experience have more engaged employees. We’re not talking small fry, either – we’re talking 150% engagement.

  Ultimately, They Boost Sales

What factors boost sales revenue for businesses? All of the above. The more loyal, passionate, invested, interested, educated, and understood your channel is, the more they’re going to turn to you instead of someone else.

This is why channel loyalty is the backbone of any strong business – because it translates into the most fundamental aims – to create a relationship which boost sales and makes that bottom line an enviable one.

How do channel rewards programs work?

Reward programs offer incentives for channel partners that encourage their third party sales teams to champion a company’s products or services above rivals.

So, how exactly do these programs work? Well, a standard program structure might look something like this:

1. Enrollment: Firstly, B2B partners are invited to join the rewards program, often through in-store sign-ups, online registration or mobile apps.
2. Accrual of points or rewards: Customers start earning points or reward currency for every qualifying transaction they make or desired behaviour they demonstrate. This can include purchases of promoted products or services, but also undertaking engagement-boosting activities such as leaving reviews, undergoing product training or referring friends.
3. Redemption of rewards: As partners accumulate points or rewards, they have the opportunity to redeem them for various benefits or incentives. These rewards can range from merchandise gifts, discounts on future purchases, upgrades, free products or services, exclusive access to events or sales and even travel experiences.
4. Tiered systems and advancements: Some b2b loyalty programs employ tiered structures where customers can progress through different levels based on their recent engagement or spending. Advancing to higher tiers often unlocks additional benefits or rewards, providing further incentives for customers to increase their engagement with the channel.
5. Data collection: Channel rewards programs also serve as valuable tools for gathering customer data and insights. Marketers can use this information to tailor their communication efforts, product recommendations and enhance the overall customer experience (all based on individual preferences for reward).
6. Feedback: Successful programs continually evolve based on both direct partner feedback and feedback passed on from end consumers. Reward channels provide a means to monitor program effectiveness, gather insights from customer interactions and make adjustments to optimise the program’s structure and reward offerings ‘on the fly’.

The different types of channel rewards programs

Reward programs like this come in all shapes and sizes. But here are 8 common formats to consider in your business:

Volume-based programs

Volume-based programs provide partners with incentives based on the volume of products they sell or purchase. As partners achieve higher sales volumes, they earn greater rewards or discounts. This system motivates partners to ramp up their sales efforts, resulting in increased revenue for both manufacturers and partners. By rewarding sales performance, this system fosters healthy competition amongst partners.

Tiered programs

Tiered reward programs categorise partners into different tiers based on their performance or level of engagement. Partners progress through these tiers by meeting specific criteria, such as sales targets or customer satisfaction metrics. As partners advance to higher tiers, they unlock additional benefits, rewards or privileges. This tiered structure incentivises partners to strive for higher performance, thanks to the recognition and reward of excellence.

Training and certification programs

Training and certification programs equip partners with the knowledge and skills needed to succeed in their roles. They provide educational resources and training modules tailored to the products or services offered by manufacturers. Partners earn rewards upon completing courses or achieving certification milestones. Well-trained partners are better equipped to engage with customers and address their needs, which in turn, is likely to drive sales growth.

Co-marketing initiatives

This involves collaborative marketing campaigns between manufacturers and partners. Manufacturers provide support, funding or resources to assist partners in executing marketing activities. Partners, in turn, actively participate in these initiatives, leveraging their local market knowledge and customer relationships. Partners earn rewards based on their level of participation and the success of co-marketing efforts. By joining forces, manufacturers and partners amplify their marketing reach, enhance brand visibility and attract new customers.

Market development funds (MDF)

Market development funds allocate spend or resources to partners to support promotional activities in specific markets or regions. Partners utilise these funds to execute marketing campaigns, host events or conduct market research. Manufacturers, however, may offer incentives based on the effectiveness and ROI of partner-led marketing initiatives supported by MDF. By investing in market development, manufacturers and partners have the chance to capitalise on emerging opportunities and expand their market reach.

Rebates

Rebates provide financial rewards or retrospective discounts to partners based on predefined performance metrics. Partners receive rebates for achieving or exceeding performance goals set by manufacturers. These programs motivate partners to drive sales and optimise inventory levels to maximise their rewards.

Specialisation programs

Specialisation programs recognise and reward partners that demonstrate expertise and specialisation in specific product lines, industries or market segments. Manufacturers offer additional incentives to partners, such as access to advanced training, priority technical support or preferential pricing. Partners are encouraged to focus on areas where they can differentiate themselves and add unique value to customers, which in turn, enhances their competitiveness and captures market opportunities in targeted segments.

Referrals

Referral programs incentivise partners to refer new customers or leads to the business. Partners earn rewards or commissions for successful referrals that result in new business or sales. Manufacturers and partners are encouraged to tap into their extensive networks, driving customer acquisition and revenue growth.

Need help creating a channel reward program?

As you navigate the intricacies of setting up a channel loyalty reward program, seeking a little assistance from seasoned pros can ensure a far better ROI. At Incentivesmart, we’ll ensure your channel program is tailored to meet the specific needs of your b2b customers and channel partners. So, what are you waiting for? Get in touch today!