iclp singapore - motivating partner loyalty

CREATING PARTNER LOYALTY IN A RAPIDLY CHANGING CHANNEL LANDSCAPEJULY 2015

2CREATING PARTNER LOYALTY IN A RAPIDLY CHANGING CHANNEL LANDSCAPE

Why channel chiefs should care about loyalty

Your channel partners have choices. Partners today can represent as many as 12 different vendors,1 and regularly review their portfolios. When they update their solution portfolio, will your products and services make the cut?

Technology manufacturers today have a variety of challenges to face as go-to-market strategies rapidly evolve. Channel chiefs are tasked with increasing sales through the indirect channel while simultaneously confronting business transformation on an epic scale, such as:

• The shift from on-premises to cloud-delivered solutions, including as-a-service subscription services

• The change from large transaction-based sales to a recurring revenue business model

• Rapid innovation and introduction of new products and services, and the need to enable channel partners for success

• An ever-complicated partner ecosystem with “old guard” partner types like system builders and VARs vying for vendor benefits along with new “born-in-the-cloud” partners and growing numbers of hybrid partners selling a combination of products and services

• The explosion of third platform technologies – mobile, cloud, social, big data (including analytics) – that are changing how companies do business and how they buy products and services

• The growing convergence of B2B and B2C routes to market as formerly discrete sales routes become increasingly permeable – for both consumers and businesses.

Think differently about how to secure the loyalty of channel partners.

With rapid change now the rule instead of the exception, how do vendors engage with partners in a meaningful and lasting way?

Gartner’s Tiffani Bova sounded the death knell for old-style, volume-driven, ‘90s era partner programs.2 While challenging the inertia shown by some vendors in adapting their partners to the 21st century, it was acknowledged that existing partner programs have become a straitjacket for many manufacturers – they are held captive by their investment in their current partner program and hampered in crafting a new approach better suited to today’s channel ecosystem.

There is nothing we can do to slow down the pace of change we are facing as an industry. However, what we can do is work hard to become more agile and adapt to those changes more quickly, without disrupting the existing business too much.

“The re-imagination of how to work with the channel will be necessary if a provider wants to respond accordingly to the new speed of business and IT departments... Programs need to move to a holistic, integrated and customer-driven program framework.”

Tiffani Bova. The 90’s Called – They Want Their Channel Program Back! Gartner, 2015

The problem for tech vendors is clear, but what’s the solution?

Think differently about how to secure the loyalty of channel partners.

In this white paper, we outline how loyalty – the ability to understand, engage and reward your partners in a relevant and meaningful way that motivates them to buy and spend more with you, and become advocates – is the one constant that will not only differentiate your program, but build a long-term relationship with your channel partners that will make a difference to your business performance.

1 Source: Harmon, Tim. Making the Case for Partner Loyalty Investment. Forrester, 2014.2 Source: Bova, Tiffani. The ‘90s Called – They Want Their Channel Program Back! Gartner, 2015.


1. Think of your partners as customers

What we’re advocating first is a shift in mindset: it’s time to start thinking of your partners as customers rather than as an extension of your salesforce. Those partner programs of the

‘90s? They were designed to step channel partners through a linear process with a single end in mind: more sales. Today’s channel is made up of a rich mix of business types – all looking for something different from vendor relationships to support their businesses (e.g. technology, support, revenue, solution fit, etc). Like customers, partners can ‘walk’ at any time so only by understanding them can a vendor work towards minimizing that risk.

If your partners are customers, what does that say about meeting your revenue goals? Consider this: American consumers with a strong brand attachment (i.e. they are loyal)

“deliver a 23% premium over the average customer in share of wallet, profitability and revenue.”3 But what if those were your channel partners? Imagine if you could increase brand attachment/loyalty by half that percentage!

Loyalty is a strategy, incentives are a tactic.

Loyalty as a marketing and engagement strategy is really in its infancy in the channel and often misunderstood/misused. Providing incentives to partners, as is common with tech vendors, may be classed as a loyalty program but this tactic does not maximize the strategic opportunity of using loyalty as a more holistic marketing approach.

To illustrate the point, just think about your favorite airline program. Miles can be earned as a standard reward for purchasing flights but this is regularly combined with short term additional earning opportunities and bonus promotions. However this is only part of the program. Priority check-in, lounge access, early boarding and for those lucky enough, complimentary class upgrades, are value-added benefits that improve the customer’s experience and along with it, their positive sentiment to that airline. The ability to motivate customer behavior in the short and long term with both more rational and emotional rewards together form a well-rounded loyalty approach.

A loyalty strategy is a journey with partners over time, while incentives are just one tactic within a loyalty strategy; and they often have a specified start date and end date.

A loyalty strategy is a journey with partners over time, while incentives are just one tactic within a loyalty strategy.

3 Source: State of the American Consumer: Insights for Business Leaders report, Gallup, 2014


Harley Davidson. Apple. When we think of loyalty, we tend to think of iconic brands like these whose customers (i.e. fans) go out of their way to defend, advocate and most importantly buy their products. But in reality, loyalty manifests itself in many different ways, all the way from a passive, opportunistic state masquerading as loyalty to the kind of highly engaged and emotional loyalty that is the hallmark of brand devotion and advocacy.

For example you may have been with the same bank or telephone provider for the past 10 or more years, not because you are loyal to or passionate about those companies, but because you don’t have much of a choice or it’s just too much trouble to switch. In the channel, fulfilment partners occupy a similar space. They are members of your partner program and regularly appear on your sales out but have little engagement and only buy your products when required to by a customer. We call this “complacent loyalty.” They are opportunists, not loyal customers. The good news is that these customers are low-cost or no-cost to manage so the goal is to assess which ones have potential and use the tactics we describe later to become more loyal.

Another type of loyalty that does drive behavior (albeit in the short term) is characterized by customers who seek out rewards. Think a free cup of coffee on your 5th visit, frequent flyer miles for every flight AND rebates when you sell a product. Just think about cashback credit cards from the banks that offer nothing more than the cashback amount. They may call these loyalty cards but in fact, the loyalty is very short lived when these so-called loyal customers are likely to switch cards to earn a further 0.5% cashback.

The loyalty earned here is only strong enough to hold a customer’s attention until a competitor offers a better discount, bargain or incentive (assuming everything else remains equal). We call this “conditional loyalty.” It’s an expensive game; just ask any CFO who needs to sign off rebate budgets each quarter. The channel has relied too heavily, for too long, on fuelling the dependency on rebate programs, in the false hope that this will drive real loyalty. In today’s market where the margins no longer exist on products, it has created major challenges for partners who have built their businesses on the back of rebate programs. These partners remain loyal for as long as the incentives are in place, but will swap your products for a competitor’s the next quarter if that vendor is running a richer incentive. Interestingly, in a channel research study conducted by ICLP in 2014, we discovered that partners rate incentives as much less important than other factors like ease of doing business, marketing support, lead generation, and timely information when evaluating what makes them more loyal.

Loyalty only becomes truly powerful when a customer has an emotional connection to a brand or product and that has to be the goal of every channel vendor. In the channel, we often talk about “connected loyalty” which would be another way to describe true loyalty – when partners and customers resist defecting to another brand just because of a special price or promotion. Instead, they are emotionally engaged and committed to a specific brand (and not just because of incentives offered). This may take the form of a partner singing your praises after attending your partner conference or promoting your solutions prominently on their website. Most importantly, they don’t see the partnership as one-sided or as transactional. You have invested to understand their business and this is obvious to the partner. And best of all, this allows you to shift the emphasis from incentives, making this strategy a stronger commercial proposition for you internally.

The 3 types of loyalty

2. Move partners along the loyalty continuum

HIGH

Perception of relationship value

and their emotional connection

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What this means for partner programs

Some channel programs historically have functioned at the lowest levels for driving loyalty – there were just no competitors within a particular solution set or in a region that were viable alternatives. And far too many channel programs fail to move beyond incentives as a tactic for engaging with partners.

While it may sound “fluffy” or “soft” to talk about an emotional connection in the context of B2B vendor-partner relationships with channel partner programs, high emotional engagement or “devotion” among brands and their customers in the B2C space has proven to drive greater customer loyalty, transform customers into advocates and relationships into profit.

The reality is that engagement does signify emotional connectivity between a partner and your company. Engagement is not just a series of interactions or transactions between a partner and manufacturer; it is about connecting on a personal level with the partner and their individual employees; therefore partner program offerings and participation need to work at BOTH these levels if the vendor wants to secure relationship longevity. If you want to limit churn of desirable partners, you need to offer them more than incentives – you need to give them reasons to engage with you emotionally (holistic value) – not just transact with you (transitory value).


3. Unlock the value in your partner program with a loyalty strategy

If you think about your partners as customers, then it is pretty obvious that your channel program is really a loyalty program. If we accept that loyal channel partners engage more fully, sell more of your products and solutions, and are strong advocates for your products and services, then the goal for channel marketers surely must be to focus on loyalty as a goal.

The good news is that nearly every vendor has in their possession the tools to deliver a complete loyalty program: tiered membership, member data, password-protected website, financial rewards, personalized communications, exclusive content, accreditations, recognition and support.

Armed with the framework and tools necessary to deliver a loyalty program, a vendor can then set about crafting propositions that will cut through, differentiate and start to engage with channel partners creating real long term value. Looking at your partner program from a different perspective opens up new ideas and opportunities that remove the channel blinkers that still hold back so many programs today.

ICLP recommends a four-part framework for a loyalty-driven channel approach: foundation, delivery, motivation and assessment. Most channel programs already have many of these tactical components in place but lack a loyalty vision that synthesizes the individual tactics into a cohesive strategy to build relationships with partners that are relevant and deliver commercial success.

1. The foundation: combine product, brand and program to differentiate and deliver relevance

What initially attracts potential partners to your partner program? Your brand, and the products and services available for partners to add to their portfolio. These are both generally outside the sphere of influence for channel chiefs, but anyone who has conducted in-depth partner satisfaction research understands clearly how frustrating this can be for channel managers when product issues reverberate through the market. Partners may have problems with products or their customers may be hearing about issues (largely through social channels) and be reluctant to accept certain products or services based on their perceptions about reliability, value or support.

The other key factor of your loyalty strategy’s foundation is your channel partner program.

The foundational aspects of your channel program are what you deliver to partners. These must meet industry standards and are often benchmarked against competitors. In fact, benchmarking has become so fundamental an activity in the channel – “Are we offering what our competitors are offering?” – that few true differentiators exist at this level as manufacturers constantly assess and reassess each other’s offerings to ensure their program is competitive. Partner programs are experiencing competitive convergence4 and best practices are no longer differentiators, but table stakes offerings that manufacturers must provide just to appeal to prospective partners.

Only vendors who invest in understanding their partners business models and needs will be successful at being relevant and indispensable which leads to partners increasing their loyalty/affinity.

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2. Delivery: data-driven relevancy for an engaging partner experience

Relevancy is the name of the game for your channel partners. They want you to provide them with the right information at the right time – when they need it. Understanding the importance of delivery is part of viewing your partners as customers – it’s about their experience, not your experience. Having strong partner programs isn’t enough – it’s how you deliver those benefits to your channel that builds the relationship. Providing a partner experience that enables them to focus on their business instead of jumping through hoops to navigate a channel program increases the likelihood that they will remain a customer of yours, even if your competitor offers a one-time enticement for them to defect.

Having strong partner programs isn’t enough – it’s how you deliver those benefts to your channel that builds the relationship.

The importance of data

Achieving the desired outcome – changing a specific behavior from one state to another – is your goal as a vendor. The ability to leverage data on all aspects of a partner’s interactions with your company enables you to target program delivery, but is also important at the next level of your loyalty strategy – understanding how and when to motivate partners to change behaviors. There are three broad categories of data about your partners that can be transformed into insight that will enable you to deliver program benefits to the right partner, at the right time, and with the right message:

a. Profle data - what you know about the partner’s business

b. Behavioral data - how each partner is interacting with your partner program

c. Sales data - should tell you not only what they are selling and renewing, but to whom they are selling and renewing.

Using dialogue to differentiate

Communication is one area in which you can differentiate your program – and it’s essential in creating an experience that helps engage your partners and shifts the loyalty needle in a positive direction.

Communication today must be data-driven and interactive – you cannot just talk at your partners and rely on your partner portal, email, and emailed newsletters to build relationships. Data from across your entire program can be used to target and deliver messages, ensuring that differentiated information is delivered that meets the roles and information needs of individual partner stakeholders. To-partner communications can be used to nurture partners and not only inform partners, but elicit desired behaviors, especially when combined with motivation. To-partner marketing automation is sometimes a bit of an afterthought, but leveraging the data you have on your partners enables you to customize your communications to create truly relevant multi-channel messaging that deepens the relationship you have with your partners.

4 Source: From Michael E. Porter’s What is Strategy? In HBR’s 10 Must Reads: On Strategy. Harvard Business Review Press, 2011.

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Communication is one area in which you can differentiate your program – and it’s essential in creating an experience that helps engage your partners and shifts the loyalty needle in a positive direction.


3. Motivation: the key to true loyalty with your channel partners

You’ve no doubt heard the proverb “you can lead a horse to water, but you can’t make it drink.” Every channel program manager can feel the pain in that statement – how often have you added a new program or benefit for your partners only to struggle to get them to use it? Or your company introduces a new product or service and you have trouble getting partners to add it to their portfolio? This is where motivation plays an important role in your loyalty strategy.

Motivation is the key to changing partner behavior whether that is encouraging a partner to sell more or to complete a training or certification course, or even to document a case study. Motivation comes in two “flavors:” extrinsic and intrinsic. Extrinsic motivation happens when a person engages in a behavior solely to receive a tangible reward. The channel has traditionally used a lot of extrinsic motivation – financial incentives in the form of rebates or cash and merchandise to partner sales teams. And what kind of loyalty has been achieved? Conditional loyalty. Not very sticky, and definitely not long term.

Even worse in the channel is where extrinsic motivators like rebates are already being factored into the bottom line by most partners which means they have no special value. They are not changing partner behavior, they are reinforcing existing or outdated partner behavior. If you rely heavily on financial motivation, then at least step through an analytics exercise and identify which partners are actually increasing sales when they receive these kinds of rewards versus partners just banking your money every month while they purchase the same products, in the same amounts.

Intrinsic motivation occurs when someone engages in behavior because it is personally rewarding – where there’s an emotional connection. This is aligned to our definition of connected loyalty. Intrinsic motivation has been under-utilized by the channel and seems to be infrequently used in partner programs despite its prevalence in B2C scenarios. The use

of intrinsic motivators could provide a significant opportunity for those vendors who can work out how to apply it in an appropriate way for B2B customer relationships.

Learnings from other sectors

Taking the approach that partners are customers and your channel program is your loyalty program, what can be learned from other brands that are using both extrinsic and intrinsic motivation to positively change the behaviors of their customers?

• Most airlines that require a minimum number or tier or status points (that have no financial value) in order to achieve a preferred tier status in their loyalty program. These points are extremely important to a frequent traveler because they determine the status and recognition of an individual traveler with that brand and as a result, are successful at driving behaviors

• LinkedIn uses progress bars to encourage members to add more data to their profile which in turn becomes more valuable to LinkedIn in terms of both making the member’s experience more relevant and enabling them to offer more targeted advertising to their business clients

• Some vendors in the technology space offer their customers and partners points for completing tasks that increase engagement, advocacy and sales. The earning rules are designed to drive incremental behaviors by increasing the earnings ratio upon hitting published thresholds

• Recyclebank rewards users for doing everyday things that are good for the environment, such as learning how to cut back on water consumption or purchasing greener products – specifically, those with the Recyclebank logo. Users earn points by working their way through a tiered series of questions and answers, learning about greener living practices and pledging to follow them, and exchanging points for rewards.

Intrinsic motivators

Extrinsic motivators

Change+ =


The power of gamifcation

The B2C world is full of success stories on the power of gamification in changing customer behavior and the B2B world is just now realizing how powerful the introduction of game techniques into partner programs can be in changing behavior. Forrester defines gamification as “the insertion of game dynamics and mechanics into non-game activities to drive a desired behavior.”5

Gamification can be used to bridge extrinsic and intrinsic motivation. The use of leaderboards, badges and competitions between teams or individual personal scores may focus solely on intrinsic motivation. Embedding a loyalty currency such as points, another element of gamification, can deliver the best of both intrinsic and extrinsic motivators. The rewards offered when using points as a loyalty currency do not need to be cash or merchandise. Added to the intrinsic satisfaction of “winning,” partners may redeem points for items such as training credits, marketing activities and demo units.

It’s time however for vendors to be more creative and introduce more of the “fun factor” to partner programs or loyalty programs, albeit in a relevant way that influences the desired behavior. Thinking of your partners as customers or even consumers opens up a world of opportunity when thinking about how to achieve your long list of priorities; increase training, recruit new partners, build better profiles, carry out research, adopt new ways of working. The list is endless and remember it is not limited to sales!

Financial incentives and a reliance on extrinsic motivation is commonplace and is a traditional approach that could be regarded as potentially outdated as a standalone motivator, especially considering the big margin that supported rebates are no longer available. Partner programs with an embedded loyalty strategy will realize the power of intrinsic and “hybrid” intrinsic and extrinsic motivation programs to create experiences for partners and their sales teams that are rewarding because they are engaging and fun. Connected loyalty is achieved when utilizing intrinsic motivation to build relationships with your partners.

5 Source: Improve B2B Sales Force Behavior Through Gamification Programs (Webinar, Peter O’Neill). Forrester, 2015.

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4. Assessment: chart your path forward by knowing where you are now and where you have been

Finally, as we all know, it’s not enough to deliver programs or motivate partners; we need to know when and how well the strategy and all of these tactics are working. So, of course you need to measure results! In an ideal world, manufacturers want to measure wallet share to determine program success.

Unfortunately, partners are about as likely to tell you that as your company is to tell them what the margin is on a product.

Instead of market share, there are all kinds of ways to ultimately evaluate the success of your loyalty strategy

in increasing sales, starting of course with sales numbers themselves, especially incremental sales, quarter-over-quarter or year-over-year growth, etc. In addition to sales, you can also look at your partners’ engagement with you. Are they taking advantage of more training opportunities? Selling more of your portfolio? Opening and reading the newsletters you send or visiting your website more? Are your partners happy with their partnering relationship with you?

Define your business goals, identify measurements for each, and conduct regular evaluations to assess your progress. Satisfied partners and their end customers can be powerful advocates for your brand and products, which in turn will increase business for you and your partners.

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Loyalty in the channel – partners as advocates

We all know the channel is evolving. The pace of innovation guarantees that not only will your products and solutions continue to change, but so will your channel – including some of your partners and the types of partner best suited for a mutually beneficial partnering relationship.

When you think about your partner program and what it means to engender loyalty with your partners, ask yourself these questions:

Where is our program now?

What would I do if I was in their shoes?

What are our business goals?

What is the next step on that journey?

If you think only in terms of a destination, you will be forever chasing a chimera. If you embrace the journey and focus on building true loyalty – a loyalty strategy that springs from delivering an excellent and valued experience that meets the needs of your partners – then your participating partners will be willing to evolve with you. Like the devoted fans of a sports team, partners can be advocates who will weather the occasional rainy day and stay the course with your company.

From the commercial perspective, this partner focus will also influence your metrics of success for your program. Not all targets should be short term, save those for sales incentive tactics. For true, connected loyalty, focus on getting to the next point on your journey, rather than strive for an endpoint that will always be a moving target.

To guarantee true loyalty and devotion from partner advocates, build a channel loyalty strategy that meets longer term goals, not just a program that addresses the short term needs of now.

About ICLP

We drive customer devotion. We give your customers compelling reasons to engage, spend more and become loyal advocates - whilst delivering commercial results for your business.

As a worldwide leader in loyalty marketing and CRM, ICLP builds loyalty and creates devotion. From acquiring customers and understanding them as individuals, to creating relationships that engage, reward and inspire loyalty, we turn customers into advocates and relationships into proft – and have done for over 25 years.

We have global experience in B2B and B2C loyalty marketing in multiple industry sectors including retail, travel, fnancial services and technology. Our expertise is underpinned by the skills and talents of over 600 talented colleagues who work across our 16 offces for clients in over 170 countries. With customer data at its heart, together we uncover insights, determine and deliver tailored experiences that create loyal customers and improve commercial performance.

ICLP is a Collinson Group company. Collinson Group is a global leader in influencing customer behaviour to drive revenue and add value for our clients.

With a unique blend of industry and sector specialists, the group develops and delivers market-leading products and services to help build, manage and optimise customer relationships across four core capabilities: Loyalty, Lifestyle Benefits, Insurance and Assistance.

© ICLP Worldwide 2015

A COLLINSON GROUP COMPANY

For more information on how we can help you, please contact Angela Tan at [email protected] or +65 6416 6319.

iclployalty.com

iclp singapore - motivating partner loyalty

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