If you've been in the world of digital marketing and sales for any period of time, you've certainly heard of the term "channel incentive." But what, exactly, is a channel incentive, and what are the trends involving channel incentives in 2019 and beyond?
What Is a Channel Incentive?
Tom Horton writes that a sales channel incentive is something used to influence behavior in buyers. These incentives establish new behaviors, change or otherwise cease old ones, or shift behaviors into a new practice.
Let's go over an example of a sales channel incentive: Suppose you run a hardware store, and you have a brand of hammers that are either not selling well, or being discontinued. In order to move your inventory of hammers that aren't selling well, you'll offer a special promotion on the hammers so they can clear out.
While your customers may buy your discounted brand of hammers simply because they're a discounted brand of hammers, they'll buy your discounted brand of hammers again and again if they are of good quality or even better quality than the brand of hammers that they had before. But if your brand of hammers no longer sells after the promotional sale is over, then the behavior of the consumer did not change, since the incentive value was no longer there (and that consumer will simply buy the next brand of hammers that go on sale).
And that same theory applies to channel incentives: They'll influence your consumers temporarily, but it's up to you, the seller, to establish a pattern of behavior that turns a temporary sale into a long-term and loyal customer.
So now that we know what, precisely, goes into a channel incentive, let's take a look at the top channel incentive trends in 2019 and beyond.
Prior to the internet becoming the force that it is today, companies were valued by their tangible assets (their equipment, their computers, their supplies). However, according to Ocean Tomo, 80% of 21st-century businesses are valued by their intangibles, which include brand value, algorithms, customer data, ideas, relationships, and leadership quality. Additionally, the Harvard Business Review assesses that business capital has become so affordable, businesses are now valued more by their human capital than by their financial capital.
Ultimately, this suggests that a company's culture is its most valuable asset. It's no longer enough to simply put out a good product -- your company's greatest channel incentive will be your company culture, which resonates with a set of values that your customers believe in.
Incentives and Rewards
When it comes to channel incentivization, it's not enough to simply provide a good sale -- you have to reward your customers with something that will keep them coming back for more.
A recent study conducted by PriceWaterhouseCoopers suggests that global economic growth is on the path to accelerate at the greatest pace since 2011. And the vast majority of growth is happening within the rewards and incentives market (with very few exceptions).
As a result, the volume -- and rate -- of mergers grew exponentially in 2018, and this is set to continue into 2019 and beyond.
"Over the next year, markets and budgets will continue to grow, although at a slowing pace potentially, given four on-going constraints: end users concerns, cost pressures, regulatory restraints, and risk mitigation. Mergers and acquisitions will continue, and the issues of trust and customer care during the transition will become paramount," said PriceWaterhouseCoopers.
Regulatory Pressure Continues to Drive Changes
When the European Union (EU) put the General Data Protection Regulation (GDPR) into effect in 2018, it forced a new set of regulations onto internet-based businesses that wanted to do business in the EU.
Now, any company that wants to conduct business in the EU must adhere to strict gathering, retention, and processing rules for any data collected on EU citizens.
But while this regulation was, in a way, necessary, experts believe that over-regulation of the market is ultimately detrimental to businesses.
And these trends suggest that regulatory pressure will continue to drive changes in the market in 2019 and beyond. An informal study conducted by the Incentive Research Foundation suggested the following:
- Seventy percent of respondents said they had made changes to their programs' design, communications, rewards, and/or reporting in response to regulations.
- Over 50% of U.S. firms that reported increased accounting and program scrutiny are changing the products included in their sales or distributor channel/incentive programs.
- Ninety percent of firms said that their business has taken a proactive approach to address regulatory compliance in their non-cash rewards programs before the government enacts the regulations.
- Forty-five percent of businesses that participated in the survey said they have reworked the entire program's underlying business purpose.
Companies Will Become More Experiential
Relating to the first trend -- specifically regarding companies that now enforce a brand-asset culture -- a final channel incentive trend that you need to consider for 2019 and beyond is the trend of experiential companies (that is, companies that focus on the overall customer experience, rather than a one-time opportunity).
According to the Incentive Marketing Association, brands are no longer focusing on actual sales, but on relationships with their customers. By doing so, they're nurturing what's known as "intrinsic drives" that exist within each individual to create a unique experience that keeps him/her coming back for more.
This has created something that Joseph Pine and Jim Gilmore call "The Experience Economy." Operating on what's known as the "Champagne Principle" -- in that the first sip of champagne is the sweetest, with every sip thereafter having less of an attraction -- Pine and Gilmore suggest that when businesses create a series of exclusive experiences for loyal customers (especially through incentive channels), they're motivating them to buy more, and more frequently.
What's more, thanks to such things as social media marketing -- a marketing technique that didn't exist a few years ago -- the so-called "everyday consumer" can serve as a tool to share the experience with other "everyday consumers" and inspire them to "join the exclusive club" (that is, become one of your loyal customers).
"An authentic connection with your channel requires transparency with your goals, and an earnest desire help people achieve their own goals as well. Understanding that effective incentives are not 'one-size-fits-all' means getting to know the people in your audience: what makes them tick, what is unique to them, how they feel about your brand. There needs to be a sense of mutual benefit that goes deeper than giving points for selling stuff," said the Incentive Marketing Association.
Contact CoreCentive for All Your Channel Incentive Solutions!
Regardless of ability or role, sales incentive and channel incentive programs should motivate each individual to improve their performance in line with broader organizational goals. At CoreCentive, our mission is to provide your company with unique engaging and rewarding channel incentive solutions that are specifically designed for you.
With CoreCentive's world-leading SaaS cloud-based platforms, you can quickly and easily set up and deploy cost-effective sales and channel incentives programs and employee recognition and rewards programs.
For more information about us and our services, contact us today to see what we can do for you.