A majority of mid- to large-size manufacturing companies that use incentive strategies to boost sales, increase mindshare among channel reps, and get a competitive edge upped their investment in the tactics last year. According to a survey conducted by WorkStride, 83% of the respondents said they spent more on incentives in 2017 than in the previous year.
In its report, The State of Channel Incentive Programs in the Manufacturing Industry, WorkStride noted that a positive return on investment in incentive programs was cited by 80% of the organizations as a reason for the increased spending. Nearly 20% of the respondents said the incentive programs resulted in significant gains in year-over-year sales.
Incentive programs are hardly an after-thought for most manufacturing companies, the survey revealed. Almost 20% said they run more than 50 incentive programs annually. More than a quarter of the respondents run between 21 to 50 programs. Almost a third conduct between 11 and 20 each year.
The respondents reported running a variety of incentive programs. Loyalty-based rewards/rebates topped the list of programs being offered by 68% of the respondents. Almost half of the companies offer MDF or other co-op programs. 41% offer spiffs.
Despite their enthusiasm for incentive programs, the respondents said there is ample room for improvement in their activities. Indeed, 80% of the respondents noted that at least one of their programs failed to meet sales goals.
Manufacturers lamented that their incentive programs were not effectively engaging a broader range of sales reps in their channel organizations. Because the top 20 sales reps are usually rewarded with every promotion, incentive programs often negatively impacted the morale and productivity of remaining workers, almost two-third of the respondents agreed strongly or completely.
In its report, WorkStride commented that organizations with in-house managed channel incentive programs may lack the tools or specialization required to segment their promotions’ audiences appropriately. Of the survey respondents, more than half run promotions that are the same for everyone, regardless of region, performance level, or product type. 42% of organizations only run promotions that target all participants at the same time. 45% of them only have promotions that are tailored to specific audiences. Just 14% of organizations have a mix of the two types.
The majority of the respondents that run their own incentive programs – 80% – agreed that a third-party provider could conduct channel programs more efficiently. Desired improvements included:
Respondents to the survey reported spending an average of 23% for administration and 77% on payout. But 27% of organizations will spend between 26% to 50% of their incentive program budgets on administration.
In its report, WorkStride commented that the data could imply that many organizations use their budgets on higher-cost initiatives, such as printing materials to promote their incentive programs. Tracking engagement with these assets is difficult, WorkStride noted, limiting a company’s ability to understand how many reps saw them, participated, and generated sales.
A more cost-effective method of communicating with indirect sales representatives could include both face-to-face interaction with an organization’s own field sales representatives coupled with digital methods of communication, including email, suggested WorkStride.
The WorkStride survey was conducted by Wakefield Research in the fall of 2017. Respondents included 250 mid- to large-sized North American manufacturing organizations that go to market via indirect channels. Copies of the report are available here.