Are You Tracking The Health Of Your Channel Incentive Program?

By Brian Crockett, Head of Marketing, Vanson Technology Services

Determining whether a channel incentive program is successful can be a challenge for many program managers, but it is critical for a healthy program – and for securing ongoing organizational funding and support!

It can be helpful to look at channel incentive program success metrics across four primary dimensions:

• Program Engagement:  Are program participants sufficiently engaged with your program?
• Behavioral Goals:  Is your program driving the desired behaviors?
• Program Financials:  Are you effectively managing the ongoing program costs and liabilities?
• Reward Redemptions:  Do you know your most and least popular reward types?

Here’s a more detailed looked at all of them.

Program Engagement

One important yardstick is determining whether you are effectively engaging potential program participants. Some of the metrics that you can put in place to measure program engagement include:

• Scale:  Number of program participants.
• Growth:  Number of new program participants.
• Reach:  Percent of total potential participants that are registered.
• Portal Logins:  Number of participants who have logged into the program portal (last 30 days, 60 days, 90 days).
• Earnings Activity:  Percent of participants who are actively earning program credits.
• Inactivity:  Number of participants who become inactive.

Trend analysis is also valuable, including year-over-year changes in key metrics.  Engagement metrics can also be viewed by sales region, by distributor, etc.  Similarly, programs with tiers should include the ability to view all program metrics by tier.

If you are not seeing the program engagement that you expect, you may need to reevaluate your program’s value proposition.  Is the program sufficiently compelling from an effort/reward perspective – is the “juice-worth-the-squeeze” for participants? 

If you feel the program value proposition is compelling, you may need to relook whether you are effectively communicating program benefits.   Are you reaching potential program participants?  Are potential influencers informed about the program and its benefits, such as distributors or dealers in a multi-level channel environment?  

Behavioral Goals

The essential goal of any well-designed channel incentive program is to drive desired behaviors by program participants, typically incremental sales.   How well are you measuring whether your program is driving desired behavior?

We’ve written previously in Channel Marketer Report about measuring the success of a program, including basic ROI calculation, customer lifetime value, baseline performance analysis, etc.; while those analyses still apply, program managers can benefit from simple sales-based metrics.   One of the challenges can be accessing sales information, especially for multi-channel programs involving distributors, resellers, and/or individual sales people. 

How do you incorporate sales data?  Programs that are designed to incent distributor sales can typically be supported by regular data file transfers with sales information (and adjustments such as returns).  Programs incenting multi-level sales (i.e., with distributors and resellers) can be trickier, often requiring file transfers from your distributors on what they sold to their reseller customers. When sales data isn’t readily available, many programs rely on a claims process.  Typically, these program require a proof of performance such as an invoice which are submitted via an upload process on the program website or processed via mail, email, or even fax.

Some of the metrics to measure driving targeted behavioral goals include:

• Sales:  Sales information on a monthly, quarterly, annual, or year-to-date basis.
• Sales by Product:   Sales tracking at the product, brand, or category level.
• Average Sales:  Sales per program participant.
• Quantity Sold:  Some programs benefit from tracking both sales and item quantity sold.

Reporting typically includes the ability to track sales by participant type, geography, sales territory, participant status, and other filters.  Trend analysis can be also be valuable in measuring behavioral goals, especially year-over-year changes.

Program Financials

A third dimension of measuring success of a program is the financial viability of the program, especially the ongoing costs and liabilities associated with the program. 

• 

A points-based program readily lends itself to financial measurement, with the ability to track points earned, points redeemed, and points outstanding.   Metrics to measure driving program financials include:

• Points Earned:  Total points earned in a time period (across all participants).
• Points Redeemed:  Total points redeemed in a time period.
• Points Outstanding:  Total point balance at a point in time (reflecting points earned and redeemed, as well as point adjustments).
• Average Points Earned:  The average number of points earned by participant.
• Average Points Redeemed:  The average number of points redeemed by participant.
• Average Points Balance:  The average point balance per participant.

Trend analysis is also useful here; for example, if point redemption is up versus the prior year, it means that the “burn rate” of the program is increasing.  If your program offers bonus points (for example, for special promotions or other incentives), it is useful to track base points vs. bonus points.

Measuring program liability beyond point balances is critical.  Program managers face a two-edged challenge in managing program liability – they do not want the overall program liability to get too large, which typically requires a financial set-aside for anticipated future redemptions, and they do not want to promote an excessive number of redemptions in a given time period because of the near-term budget implications. 

Some of our clients have used the following metrics to better understand point liability and liability trends:

• Points Redeemed-to-Earned Ratio:  The ratio of points redeemed to points earned by year. This ratio can help determine if your participants are earning more than they are redeeming, thus increasing your overall program liability.  
• Points Outstanding by Year:  Comparison of the end of year point balance, measured across multiple years. 

Reward Redemptions

A fourth dimension is the ability to view your reward redemptions by category.  What are the most popular redemptions?  What are the redemptions offerings which are not getting much uptake?   Effective reporting on reward redemptions can help you optimize your reward mix and overall program appeal.

Some of the metrics to measure reward redemptions include:

• Item Quantity Redeemed:  Total number of items redeemed for each rewards category.
• Transaction Count:  Number of transactions by category (valuable if some redemptions include multiple items in a category).
• Member Count:  Number of program participants redeeming rewards in each category.
• Points Redeemed:  Number of points redeemed by category.

These metrics are typically displayed in table form, and are ranked ordered (e.g., by points or item quantity).  The table can also provide a view of percentages (e.g., the percent of all points that a particular category represents).

Brian Crockett is Head of Marketing for Vanson Technology Associates.  Vanson provides innovative solutions for channel incentive programs and other loyalty programs.