Partner Loyalty Isn’t the Same Thing as Your Rewards Program!

By Tracy Delphia, Market Analyst for B2B and Channel, ICLP

“I want to start a partner loyalty program.”

We get calls with some version of that query regularly at ICLP.  What the caller invariably is asking about is some kind of incentive program for their partners. “Loyalty” and “incentives” have become conflated in the minds of many in the industry, but building partner loyalty is about a lot more than delivering incentives to partners.

The truth is: loyalty is a strategy, and incentives are just one tactic in helping to achieve that strategy.

In the B2C world, the relationship between loyalty and emotion is accepted – consumers are passionate about some products and services; they have an emotional connection to them that strengthens their commitment to continuing to buy and recommend that product. It is becoming evident that B2B buyers as well may feel emotional connections to particular products and suppliers, but making the “emotional argument” is a difficult one still in the B2B world.

Let’s be honest, vendors are not “all in” on anything that smacks of touchy-feely, unmeasurable emotion. What they want are results and “results” means purchasing to fuel company growth.  What ultimately matters to manufacturers is that partners continue to sell for them – not a competitor.

Lacking a way to measure what many see as ephemeral, it is easy to understand why incentive programs have been so readily adopted in the tech industry as the sole means for driving loyalty with channel partners. While incentive programs are one way to motivate partners, limiting the focus to incentives when talking about loyalty fails to maximize opportunities to engage more deeply with partners.

Loyalty in 3D:  Engagement, Value, Commitment

We encourage our customers to think of loyalty in three dimensions. One of the reasons it has been so common to use incentives programs as a stand-in for a fully-featured loyalty strategy is that collecting the data needed to build rich partner profiles and insight can be challenging. To fully understand what is happening in the channel requires an aggregated review of information that resides throughout the organization:  sales out data, partner databases (profile information), email marketing platforms, partner program tools (managed by different suppliers), web tracking tools, etc.

Here are the three dimensions and some sample metrics that might be included within each. ICLP’s Partner Loyalty Cube is designed to assign customized weightings to these (or other factors deemed important to a vendor), but vendors can of course design their own methodology using some of the thinking behind assessing a holistic partner relationship.

1. Engagement – Engagement is not only about partner participation in activities, it is an essential component of overall partner loyalty. Your objective in understanding engagement is to know which partners are engaging with you (which contacts within the partner company), how often, where, and in what kinds of activities they are engaging.  Metrics for measuring this include portal logins, email communications metrics, social participation, dwell time, and tools used.
2. Value – Value is where many manufacturers begin and end their understanding of loyalty – revenue numbers. But it’s important to contextualize this beyond unadorned POS information. Your objectives in assessing value should be not just how much a partner is selling, but what are they buying and selling, how often, and how strategically aligned are they? In other words, if your company is now offering new services and products, is the partner just selling old SKUs, or are they evolving with you? Some of the metrics you can use include recency, frequency, financial value, and strategic fit (weight the values of the SKUs being sold in alignment with your roadmap).
3. Commitment – The traditional reseller business model is quickly going the way of the dinosaur and part of a partners’ loyalty to you is their commitment to your products and services and how well their business is aligning with yours. To determine commitment, think about the training and certifications partners have with you – are they pursuing training for your newest products and services? Do they attend your partner events?  Metrics for commitment can include things like partner tenure, MDF usage, deal reg participation, joint planning and, of course, training and certification information.

The result of a three dimensional loyalty assessment is that instead of grouping partners into 3 or 4 or even 5 tiers, you instead end up with 27 partner segments. These allow you to more closely monitor the health of your partner program, target partners with customized marketing communications, and assess loyalty over time.

Loyalty isn’t ‘one size fits all’

As you can imagine, we don’t think of loyalty as a dichotomy, where a partner either is, or is not, loyal. Partner loyalty can be better understood as part of a continuum from low to high loyalty. At the low end of the spectrum are partners who have a very opportunistic relationship with you. And this is why incentives are a tactic for loyalty, but most definitely not the whole picture. A partner who buys from you only because of the rebates you offer or the SPIFs you provide, is engaging opportunistically. Your business experiences a short term bump when you offer an end of quarter promotion, but when your competitor offers a bigger promotion, these partners will be quick to take their business elsewhere.

At the other end of the loyalty continuum are partners who are truly committed to your company, products and solutions. They engage with you in multiple ways, they strategically align their business with yours, and they are advocates for your products and services with your customers.

Building a loyalty strategy requires thinking holistically about your relationship with your channel partners. Understand how you and your partners are engaging with each other, the level of commitment in the relationship, and the value yielded. Partners who are strategically engaged with you won’t be tempted by one-off incentive promotions offered by your competitors – they will instead be focused on a long-term, strategic relationship to build their business with your roadmap in mind.

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