Channel incentives and SPIFFs promise to increase partner sales. When your partners aren’t moving enough of the product lately or your budget is tight and you need results you can count on, you’re probably weighing these two options with plenty of thought. Last quarter was probably rough, or maybe your partners just don’t seem all that excited about pushing your products anymore. Or maybe a competitor recently rolled out some aggressive new partner program, and now you need to figure out how to stay competitive as you stay within budget.
It actually changes the entire way operations work with your partners, and it determines whether you’re building something that lasts or always scrambling to hit the next deadline. Plenty of businesses burn through cash on SPIFFs that come at the wrong time and just steal sales from next quarter, or they put together these elaborate channel programs that are so hard to follow that partners don’t even bother with them.
These two options can definitely change partner behavior, though they work on very different schedules and produce very different results over time. SPIFFs are great for motivating partners to take action on something quickly, and channel incentives are focused on creating relationships that deliver results month after month. What makes sense for your business depends on what you’re trying to accomplish – a new product launch might benefit from the urgency of a SPIFF. Breaking into a new market probably needs the steady pressure of consistent incentives. The businesses that do this right know that when you treat it as an either-or choice, you’re usually missing something important about how these two tools can work together.
We should look at these two strategies to see which one fits your business needs!
How SPIFFs and Channel Incentives Are Different
Channel incentives and SPIFFs are reward programs that can motivate your partners to sell more, and plenty of businesses use them interchangeably without much thought. The timeline for each one is actually quite different, though. SPIFFs are short bursts that usually run anywhere from 30 to 90 days, whereas channel incentives are long-term commitments that usually extend across 6 to 12 months or longer. That timing difference completely reshapes the way you need to plan, budget for, and execute these programs.
Dell gives us a perfect example of these two programs in action. Whenever they need to move excess server inventory before the quarter closes, they roll out a SPIFF that gets their partners moving right then and there. Partners know they only have a few weeks to capitalize on that extra cash opportunity, and they adjust their sales focus accordingly. Dell’s annual partner rebate program takes a very different approach, though – it’s designed to reward steady performance across the entire year, and it helps them build much stronger partner relationships over time.
These two types affect your partners’ psychology in very different ways. SPIFFs tap into that natural urgency response – partners see a limited window to earn extra money, and they move fast to use it. Channel incentives work more like a marathon than a sprint.
Operationally, these programs couldn’t be more different. SPIFFs need to be set up fast and communicated to your partners even faster. The whole point is speed – you want to get the message out there and track performance data in real-time as sales come in. Channel incentives need substantially more infrastructure and advanced planning to set up, though. You need strong systems to track performance data across a few months. But you also need the right strategies to maintain partner engagement and interest for the entire length of the program. I’ve seen businesses underestimate this commitment and then have a hard time keeping partners motivated halfway through.
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Partners themselves perceive these programs through very different lenses. Partners usually view SPIFFs as unexpected bonuses – nice windfalls that pop up occasionally throughout the year. Channel incentives feel more like earned rewards for their steady loyalty and commitment to your brand. This basic perception difference influences their response rates and their motivation levels when they participate in different types of programs.
Track the Right Metrics for Success
SPIFFs and channel incentives each have their place in a sales strategy, and if you’ve ever had to choose between them, you know that the choice isn’t always simple. SPIFFs can increase your sales numbers by anywhere from 15% to 40% in just a matter of days or weeks. Those kinds of results are hard to argue with when leadership wants to see immediate effects on the bottom line. The downside is that these programs usually create a rollercoaster effect where sales surge during the promotion and then fall right back down once the extra compensation goes away.
Channel incentives work on a very different timeline and philosophy. Partners who participate in well-designed channel incentive programs usually stay with you for the long haul, and the data shows this in a big way. Businesses that put money into these programs see their retention rates climb to roughly 2.3 times higher than those of organizations that don’t have them at all. This type of partner loyalty builds a stable foundation that most businesses need for sustainable growth.
The metrics you should track are going to be very different for these two strategies. SPIFFs are all about the immediate metrics – product velocity and how many of your prospects actually turn into paying customers. Channel incentives are a whole different game, though. With those, you’re watching partner engagement levels and whether your annual revenue continues growing steadily over multiple quarters or years.
Aberdeen Group’s research brings another layer to this topic with their finding that organizations with formal channel incentive programs report partner satisfaction scores that are 23% higher compared to businesses without them. Your partners actively want to represent and sell your products when they have this elevated satisfaction. It’s fundamentally different from partners who just respond to whatever compensation bump happens to be available that month.
These strategies have hidden costs that frequently slip under the radar during planning discussions. SPIFFs can exhaust your sales force if you run them too frequently, and eventually, partners start to hold back their sales until the next bonus period rolls around. Channel incentives demand more administrative oversight and patience to execute them properly, though they help you sidestep the destructive competition that sometimes emerges when partners fight one another for the same opportunities.
All these metrics and considerations tell the story of what each tool can accomplish for your business and which one aligns best with your long-term goals.
How to Make SPIFFs Work Better
SPIFFs are one of the tools that work when you need immediate results from your sales partners. Let’s say you’re about to launch a new product and you have maybe 6 weeks to capture market share before your competitors catch on to what you’re doing and start to respond.
Samsung has this down to a science with its flagship phone releases. They’ll structure the extra bonuses for their channel partners during that first month after a new model hits the market. The timing is deliberate – customer interest is already at its peak, and the extra incentive helps partners prioritize Samsung’s products over everything else they’d be selling. Software businesses pull a similar move when they want to accelerate cloud migration deals right before their fiscal year closes.
The psychology here is pretty simple. When sales partners know they have a limited window to earn extra money, they move faster. Studies have actually shown that sales teams are about 33% more likely to take action when there’s a deadline involved. Your channel partners respond to these same motivational triggers.
The problem is that most businesses sabotage their own SPIFF programs. They either try to run multiple SPIFFs simultaneously or they create qualification criteria that are way too confusing. The better approach is to keep everything simple. Choose either cash bonuses or tangible rewards – not some confusing combination of the two. Set personal targets that each partner can control instead of team-based goals that just frustrate everyone.
Businesses also run SPIFFs too frequently, and it completely defeats the whole point. Partners start to see them as part of their normal compensation when they’re running every month. The urgency disappears. These programs work best when you deploy them sparingly for particular business goals.
There’s one more consideration that usually gets missed. SPIFFs can only accelerate sales that would eventually happen anyway – they’re not magic. No amount of extra incentive is going to solve that basic problem when your channel partners don’t understand your product’s value proposition or how to position it against competitors. You need strong training and enablement in place first, and then you can use SPIFFs to drive the behavior you want.
Build the Right Channel Incentive Program Strategy
A quick SPIFF can have a real impact for a short-term sales push, but it’s not always going to cut it. When you actually need your partners to fundamentally change how they do business, the whole game changes, and you need something way stronger.
Think about what happens when you’re expanding into unfamiliar territory or launching in a completely new market. Partners in this situation don’t need a little extra motivation to make the sales happen. What they actually need is time to learn the lay of the land, to learn what these new customers care about, and to develop the genuine expertise that sets them apart. A one-time bonus payment, no matter how generous, just can’t create that level of lasting change. IBM learned this lesson early on and built its entire PartnerWorld program around it. The program uses structured tiers of incentives that help partners develop brand new capabilities and earn certifications as they progress through the system.
The numbers on this are pretty strong. Partners who stick with these structured programs for at least 12 months show 67% higher productivity compared to the partners who just bounce from one transactional reward to the next.
Programs like these can take a few different forms, and each one serves its own reason. Volume rebates maintain partners’ interest by rewarding steady and reliable performance over multiple months. Growth incentives give them a reason to push into unfamiliar territories or new market segments. MDF programs give partners the funding they need to build up their own capabilities and infrastructure. Certification bonuses create value by encouraging partners to develop technical expertise that continues to pay dividends for years to come.
Everything comes together when these incentives line up just right with how your partners already run their businesses. Most channel partners map out their strategies on annual or quarterly cycles, and when your incentive structure matches their planning horizon, your products become integrated into their core business model instead of just being an afterthought.
The best partners in any program are usually the ones who love predictable rewards for hitting their numbers. They’d much rather know what they’ll earn for their hard work than sit around and wait for the next random SPIFF to drop. Strong and reliable commissions from steady sales will always win out over those unpredictable bonus programs that come and go.
Plenty of successful businesses have figured out that picking just one strategy limits their options unnecessarily. When you mix short-term and long-term incentives, you usually create something far more powerful than either method alone.
Both Programs Can Work as Partners
HP’s Partner First program is a perfect example of how to make this dual strategy actually work. The company uses quarterly rebates as its bread-and-butter incentive structure, and then they layer monthly SPIFFs on top whenever certain products need an extra push or they want to drive up sales during particular windows. The beauty of this setup is that partners get the stability they need to plan ahead while HP can still pivot quickly when the market changes or they’re ready to launch something new.
The challenge with multiple programs running at the same time is that studies have found performance can drop by as much as 40% when a few different incentives are all fighting for partner attention simultaneously. Sales partners only have limited mental bandwidth to track all these bonuses and rules, and when programs start to overlap or conflict, partners usually just get confused instead of motivated to sell more.
Multiple incentive programs only work effectively if everyone knows what’s going on. Partners need to know which deals count toward what – are they working on their standard quarterly rebate goals, or are they chasing that extra SPIFF bonus this month? Modern PRM software has simplified this whole process, though. Partners can track all their different incentives in one system and see everything on a single dashboard – their opportunities and their earnings with everything right there.
Budget allocation needs careful consideration as well. Industry data shows that most mature channel programs allocate somewhere between 2% and 4% of their total channel revenue to fund their combined incentive programs. Businesses need to run careful analyses of their total costs and expected returns to make sure that the financial model makes sense for their particular business situation.
From my experience, too many moving parts kill participation rates. Partners usually report that more than 3 or 4 simultaneous programs get to be too much and counterproductive. Once you cross that threshold, participation rates usually plummet because the effort that’s needed to track and maximize all the different incentives just isn’t worth the possible rewards anymore. A combined strategy needs to stay simple enough so partner sales reps can explain the programs to their own teams without needing long documentation or training sessions.
Level Up Your Incentives and Rewards
The experience with SPIFFs and channel incentives is like you’re standing at a fork in the road where the two paths eventually get you to the same place. The advantage is that you don’t actually have to stick with just one strategy and ignore the other one completely. SPIFFs work great when you need to move lots of inventory in a short timeframe or when you have to hit a quarterly target. They give you that immediate push, and the results come fast. Channel incentives work differently, though – they’re much better for the long game if you want to build partnerships with businesses that care about your success just as much as they care about their own bottom line.
The businesses that have figured out how to manage this whole situation don’t look at SPIFFs and channel incentives as an either-or proposition where you have to choose just one path forward. What actually makes sense for most businesses is to work with what you’ve already got in place and then make adjustments along the way. You might run SPIFFs when you’re launching important new products, as you’re also building out the infrastructure for a solid channel program behind the scenes. As your business grows and what you need evolves, the balance of the incentives you use is going to change, too. A startup company tends to lean pretty heavily on SPIFFs in the beginning because they desperately need those early wins just to get a foothold in the market, and then over time, they’ll start to layer in more structured channel incentives after they’ve built up some momentum and credibility. An established company probably already has its full channel programs up and running. But they’ll still roll out targeted SPIFFs when they need to counter what a competitor is doing or when they need to adjust their strategy fast in a particular market segment.
SPIFFs and channel programs work best if you treat them as partners instead of as rivals competing for the same budget dollars. Each one serves a different role in helping your business grow. SPIFFs are great for that instant push – they get your partners excited and moving product right away. Your channel programs are the foundation that builds predictable, sustainable growth year after year. The trick is figuring out what your partners need to succeed and knowing the day-to-day rhythm of your particular market.
At Level 6, we specialize in helping businesses like yours set up incentive programs that actually deliver measurable results. We work with businesses to increase their sales team performance, improve their employee morale and retention, and create custom programs that fit their specific needs. Our services include branded debit cards, full employee rewards and recognition programs, and sales incentive programs that we customize specifically to your business model and goals. Every program we develop is built to drive real and tangible results that show up in your bottom line. Contact us for a free demo, and we’ll show you how we can help high-performing businesses maximize their ROI and their sales performance.
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.
