Level Points – The [inexpensive!] power on the path to GOLD
It was Black Friday weekend and all of us were inundated with sales and lucrative offers – in every part of the world. To top it off, if you have been regular shoppers at some of the big departmental stores, you got extra discounts. Prime members get early access to the Black Friday 2020 Amazon sale.
All these ensure that you keep coming back to their brands for more, year after year. Remember how airlines and hotels put you into their gold, silver, and bronze tiers – it’s no different. Each tier has a precious set of benefits and discounts for you.
In the world of the B2B tech industry and its channel partners, there is similar logic at play.
How did one become a gold channel partner?
Every deal closed/won by the channel partner got booked into the tech company’s CRM. It was then annualized and the total revenue decided which level to put the channel partner into. It was clean and simple.
So, for a channel partner to have become a gold partner, they simply generated more dollars in sales the past year. There was only one behavior to incentivize and that was sales. These partner levels (or tiers) are a “macro” incentive of sorts – the partner gets something (a higher level) for giving something (more revenue). An example:
- Gold partners generate more than $25M in revenue and get a 30% discount
- Silver partners generate $10-25m in revenue and get a 25% discount
- Bronze partners generate less than $10m in revenue and get a 20% discount
Levels and level benefits are typically more long-term because they take into account all the sales activity of the past year, and level achievement is only updated/processed annually. Contrarily, incentive programs target and reward shorter-term activities and goals; and/or represent incentives that the tech company wants to make available to all partners (or to partner segments other than levels, e.g., small partners in Europe).
What other way is there to play out the levels in a channel partner program?
In the last 2 to 3 years, this annualized revenue model has begun to evolve. To incentivize (at a “macro” level) more than just revenue, tech companies have become innovative with what they are rewarding.
For example, they have started factoring in behaviors like the customer satisfaction the channel partner delivers and the channel partner’s investment in the tech company. Woah! What?
CSAT scores are easy enough to understand, right? But what’s this investment?
It is basically how much a partner has invested in the tech company in terms of –
- How much marketing they did do on behalf of the tech company
- How much training do they take to become experts in the tech company’s solutions
What might level points look like on the ground?
To factor multiple behaviors/goals into a partner-level program, you should consider moving to a flexible points system.
- Revenue – for every $1000 in revenue, the channel partner is awarded 1 point
- CSAT
- for an average score of 10, the channel partner is awarded 2000 points
- for an average score of 9.9, the channel partner is awarded 1800 points
- for an average score of 9.8, the channel partner is awarded 1600 points
- Investment – for every $100 invested, the channel partner is awarded 1 point
Then your model might look something like this:
- Gold partners earn more than 10000 points.
- Silver partners earn 3000-10000 points.
- Bronze partners generate less than 300 points.
The power of points is that it offers your channel partners the power of choice. Channel partners can choose which aspects of their business to develop.
As for the tech company, in terms of rewards budgeting, how much does it cost them to designate a channel partner as gold or silver?
Absolutely NOTHING.
For gold and silver partners, you do give away more margin, but the additional revenue they bring in justifies it.
