10 Effective Channel Incentive Programs for FMCG/CPG Businesses

The Incentive Research Foundation expects the average person's spending on incentives to increase. In 2022, this amount is projected to be $806, up from $764 in 2021. Consequently, the total incentive budget is anticipated to grow by 34%.

If that statistic doesn’t convince you, here’s a real-world example.

Last weekend, I went to the pharmacy to buy ibuprofen for my wife. She had a headache, and I wanted something reliable. The pharmacist said, “We have the store-brand version for $4, but Advil is $9. It works faster for most people.”

I chose Advil. Spending a few extra dollars for something potentially more effective seemed like a reasonable trade-off.

Now, let’s look at why the pharmacist made that recommendation. Was Advil better, or was there another reason?

Advil most likely incentivized the pharmacy to promote its product over the generic version. The generic brand might not have an incentive program, and it may not be collecting point-of-sale data to improve its strategy.

Whatever the reason, Advil successfully influenced the buying decision by leveraging incentives.

📙 The takeaway: incentives can shape purchasing behavior and drive sales.

Is your company doing all it can to use point-of-sale data to optimize channel incentive programs?

No? Not a problem, we've to you covered.

According to HBR, manufacturers can improve their understanding of customer needs by rewarding partners for sharing data. However, many manufacturers struggle with this important task.

Sharing data is merely one of the numerous actions you can encourage. Tailoring incentives to specific partner actions can help align their efforts with your business goals.

Now, let us explore the details of channel incentive programs to enhance your understanding of them.

Introduction to Channel Incentives

Definition and Purpose of Channel Incentives

Channel incentives are rewards or benefits offered to channel partners, such as distributors, wholesalers, or retailers, to motivate them to sell a company’s products or services. These incentives can take various forms, including monetary rewards, discounts, exclusive access to new products, or even training programs.

The primary purpose of channel incentives is to drive sales, increase market share, and build strong relationships with channel partners.

By offering these incentives, companies can encourage their channel partners to prioritize their products, provide excellent customer service, and drive revenue growth. For instance, a company might offer a bonus to a retailer for meeting a specific sales target, motivating the retailer to push that company’s products over competitors.

Importance of Channel Incentives in FMCG Businesses

In the Fast-Moving Consumer Goods (FMCG) industry, channel incentives are crucial in driving sales and revenue growth. FMCG businesses rely heavily on their channel partners to reach a wide audience and increase market penetration.

By offering effective channel incentives, FMCG companies can motivate their partners to sell more products, promote their brand, and provide excellent customer service. This, in turn, can lead to increased sales, improved market share, and enhanced brand loyalty.

For example, a beverage company might offer marketing development funds to a distributor to run a local advertising campaign, increasing brand visibility and sales in that region.

Channel incentives in the FMCG sector are essential for maintaining a competitive edge and ensuring that products are consistently available and promoted across various markets.

Types of Channel Incentive Programs Popular inthe FMCG/FMCD Industry

Your channel is the foundation of your business. Therefore, it is essential to select a channel incentive program that effectively motivates your partners.

However, you may wonder what channel incentives to choose. What aligns best with your partners? How can you inspire them to drive more sales for your business?

To help you navigate these questions and avoid confusion, we have compiled a list of different types of channel incentive programs along with examples. This will give you a comprehensive understanding of what is effective in the traditional FMCG/FMCD sector.

1. Sales incentives

Sales incentives, specifically channel sales incentives, are a way to reward channel partners once they reach or exceed a specific sales goal. These programs reward channel partner sales representatives based on sales volume, product type, or achieving specific goals. It is the most widely used incentive program in the FMCG/FMCD sector and a proven technique.

Sales incentives are often provided as point-based rewards, gift cards, or one-time debit cards. They can also include monetary rewards, gift cards, and travel-related perks.

• Goals: Sales incentives can help the company scale in all directions, depending on their purpose. You can leverage sales incentives to meet short-term (revenue targets) and long-term (build brand loyalty) business goals.
• Challenges: Since sales incentives focus only on sales, partners often concentrate on revenue-generating activities while losing interest in other business aspects, like building relationships. They are also expensive, which makes it hard for small businesses to afford them. Small companies new to this industry might not have the budget to afford a sales incentive program.

2. SPIFs or SPIFFs (Sales Performance Incentive Funds)

According to HubSpot, SPIF is a short-term, incentive-based initiative that motivates sales representatives to achieve business targets.

An effective channel incentive program requires ongoing evaluation and adjustment to guarantee success.

The idea behind a SPIF (Sales Performance Incentive Fund) is straightforward: It tells your sales representatives, “If you sell X quantity of products, arrange X number of demonstrations, or finalize X deals within a specified period, you will receive a reward.”

While most SPIF incentives are monetary, other rewards,, such as gifts, vacations, and acknowledgment,, can also be the foundation of a successful SPIF initiative.

Gift cards are generally reliable, although they may sometimes lack a personal touch. When salespeople must engage with several decision-makers to finalize a sale, this often results in extensive phone or call time.

Consider offering noise-canceling headphones to enhance their sales calls, a new ultra-wide monitor for improved productivity, or a subscription to a wellness program that aids in meditation and focus. The possibilities for incentive options are only limited by your creativity.

• Goals: SPIFs' main aim is to quickly meet sales goals for a particular product or service. They also increase channel partner engagement and help boost low performance. SPIFs can also be used to accelerate the pipeline, finish old stock, support a product release,, or take advantage of new market opportunities.
• Challenges: Giving SPIFs can create unhealthy competition among the partners. While some channel sales reps might try to get the most deals, some might not even try much because of the program’s competitive nature. Sales reps might also not work beforehand in anticipation of a future SPIF, which is called sandbagging.

SPIF example

The Samsung Mobile Valued Partner (MVP) Program was established for Mobile B2B resellers to foster collaborative growth, equip Samsung’s mobile business partners with cutting-edge technology and solutions, and assist them in generating larger sales opportunities.

Partners in the Samsung MVP program can enjoy various advantages that enhance their business capabilities. These benefits encompass financial rewards like target bonuses (SPIFs), market development funds, promotional support, and access to both online and in-person training sessions.

3. MDFs (Marketing Development Funds)

Marketing Development Funds (MDF) help channel partners fund initiatives that drive sales and strengthen brand visibility. These funds are allocated for specific marketing activities, such as advertising, promotional events, and content creation, to align partner efforts with business goals.

Unlike other programs, MDFs are provided upfront for specific purposes. Successful programs align partners' needs with business objectives and are used to create marketing materials or host educational events.

• Goals: MDFs aim to help partners build sales and marketing campaigns to increase brand awareness. An ancillary goal is building trust between the business and its partners. If used correctly, MDFs can make developing strongholds in local markets easier.
• Challenges: An MDF is an investment in a plan that a third party executes. Thus, monitoring the use of the money rolled out becomes difficult. Estimations can go haywire, and the execution of the plan may cause changes in the use of the MDF. It’s almost like placing a bet with no certainty about the outcome.

MDF example

Zendesk supports premium partners like SuccessCX through MDF to drive initiatives such as the CX Round Table program. These funds help partners execute targeted campaigns, expand market reach, and strengthen customer engagement.

4. Rebate incentives

A rebate is a refund or return of money. Companies provide rebates to motivate their channel partners to increase product orders or invest more in inventory. These rebates can be issued as cash refunds or rewards and points.

Rebates are among the oldest and, arguably, the most effective methods of incentivizing sales. However, evolving market conditions necessitate innovation in rebate programs, and this is where we can assist you in revolutionizing the rebates and refunds process.

• Goals: Like all other incentives, the primary purpose of a rebate program is to increase sales quantity, in this case, specific products or services. You can also use rebates to encourage data collection that helps businesses create more effective marketing strategies in the future.
• Challenges: Managing rebate and reward programs is challenging for companies. Without a well-functioning solution, running an effective program is almost impossible. The other side effect of rebates is the likelihood of unhealthy partner competition.

Rebate Incentives example

Amway, a fast-moving consumer goods (FMCG) company, relies heavily on its extensive network of channel partners. Its rebate program is designed to be simple, clear, and efficient. This program has two components: partners earn a certain percentage of their sales as rebates and can also benefit from a points-based rewards system.

5. Co-operative marketing funds

Co-op marketing funds reimburse costs incurred in a marketing initiative - usually shared by the company and channel partner. MDFs are a pre-initiative incentive, whereas cooperative marketing funds are given out after completing the marketing activity. 

• Goals: A cooperative marketing fund aims to ensure that both parties (e.g., distributor and partner) are equally devoted to a common goal: market expansion.
• Challenges: An understanding and an element of trust is a must to run a successful Co-Op Marketing Fund program if there is no understanding between the two, rolling out funds after the program could lead to a strained relationship.

Co-operative marketing funds example

Huawei is a prominent manufacturer in the electronics industry. It provides a comprehensive program for its sales and service partners, incorporating various incentive initiatives. Among these offerings is cooperative marketing funding designed to assist partners in generating leads effectively.

6. Deal Registration Incentives

The incentives that are tied to the size of the deal are called deal registration incentives. It gets difficult for sales teams and channel partners to push sales on high-cost products.

Deal registration incentives can effectively motivate partners to make sales in such cases. The more conversions or deals registrations sales reps can make, the higher their incentives.

• Goals: Encouraging on-ground sales reps is the primary goal of this kind of program. Incentivizing with money is a great way to keep sales reps engaged and motivated. High-worth incentives give partners a reason to participate and give their best.
• Challenges: Since deal registration incentives are targeted at and work best when rolled out to individuals who make the sale happen, it can get hard for the business to keep track of the deserving candidate and ensure that the incentive reaches the right person. Another possible challenge is the change of hands or roles that can occur during the deal registration process, where it becomes difficult to identify and attribute the deservedness of the incentive to one person, making participants reluctant.

Example: Monte South, simplifies deal registration by offering a commission tied to the number of successful transactions. This structured approach ensures sales partners remain motivated while aligning incentives with performance.

7. Value-added reseller incentives

Incentives for Value-Added Resellers (VARs) are introduced to channel partners, enabling them to enhance an existing product—yours—by incorporating additional features, products, or integrations during their resale efforts.

These enhanced offerings create a ‘one-stop solution’ for customers' requirements. Adding value at the sales level promotes and encourages customer purchases.

• Goals: Your on-ground channel partners have the best view of the market and customers. By incentivizing partners to add value to your product, you are working to increase your stronghold over a particular market. The creation of product and brand enthusiasm is another goal of VAR Incentives.
• Challenges: Creating trust with Value Added Resellers becomes a challenge. Allowing another company to add value to your product means extending freedom. Running a VAR program means having intermediaries involved. Such incentive programs decrease profit margins and may not be as lucrative as other programs. If gathering customer data is a goal, acquiring that information from VARs is a trade secret they may not want to share.

Value-added reseller incentives example

TTAP, a subsidiary of Toyota in Singapore, required a new system to link real-time vehicle data. They collaborated with a Value Added Reseller (VAR) named Techblocks for the necessary technology to achieve this. You can refer to this case study to understand TTAP's needs and how Techblocks addressed them effectively.

8. Referral incentives

As the name suggests, when channel partners identify and refer potential customers, you can reward them with referral incentives. Referrals add credibility that encourages purchase.

• Goals: Referral incentives have a twofold objective. The first is to encourage channel partners to act as brand ambassadors. The second is to give you more customers and sales. After all, word-of-mouth referral is the most powerful marketing tool.
• Challenges: Efficiently tracking referrals and rolling out incentives can pose a challenge. Running a referral incentive program is also capital-heavy. A business must have enough revenue to invest in to ensure growth.

The importance of referral marketing can't be written off, but clubbing it with Plum's referral rewards programs will blast it off. Here's how to do that.

Referral incentives example

KG Builders, a real estate firm offers substantial referral bonuses for each successful sale, demonstrating the effectiveness of well-structured referral programs in driving new business. This serves as an excellent illustration of an enticing referral program.

9. Enablement and Training Incentives

Enablement and training incentives are given for the time your partners invest in learning about your product to make more sales. You must equip your channel partners with the best education to help them answer customer questions confidently. 

A channel partner lacking knowledge about their products can poorly reflect your brand. Investing in enablement and training incentives is crucial for establishing a strong reputation over time.

These incentives can be structured as point-based rewards or linked to other performance-driven rewards, like retreats and vacations.

• Goals: The primary purpose of enablement and training initiatives is to educate your channel partners about your product and brand. The more they learn about your product, the more they want to sell it. You can also inform your partners about your ethos to make a more profound impact.
• Challenges: As good as your training and enablement programs may be, there is never a way to ensure that your teaching is being used. It is challenging to check implementation and measure execution results. It's an investment made on faith, hoping for favorable long-term returns

Enablement and Training Incentives example

Cisco, a company specializing in networking hardware, offers an extensive channel partner program. Their thorough channel partner guide provides valuable information on enablement and training incentives to assist you effectively.

10. Loyalty incentives and partner retention

You may have partners already excelling and do not require any of the previously mentioned incentives to remain ‘motivated.’ They could be highly skilled and very capable. However, they are also sought after by others.

Implementing Partner Retention incentives is crucial to preventing the loss of these valuable individuals to increasing competition. Now is the time to introduce these initiatives, to demonstrate that you appreciate your partners and their loyalty and to inspire them to maintain their excellent performance.

• Goals: Establish a connection with your channel partners to earn their loyalty by showing that their contributions are highly valued. Partner retention is thus the primary goal. These incentives also help you maintain a certain brand and business image,, which can be beneficial.
• Challenges: Loyalty incentives do not guarantee channel partner retention. They are you fertilizing the soil without knowing whether your tree will fruit.

Loyalty incentives and partner retention example

JK Tyres, a manufacturer of automobile components, excels in loyalty and partner retention with its innovative point-based system. This approach acknowledges and rewards its valued channel partners. Additionally, it offers an app that allows partners to monitor their progress and track their rewards in real time.

How to Choose the Right Channel Incentive Program

Different incentive programs serve different objectives. What works for one company might not be suitable for another. Defining clear goals will help you select the right program to drive the desired outcomes.

Start by identifying what you want from your channel partners. Are you aiming for higher sales, market expansion, better product knowledge, increased engagement for a new product, or something else entirely?

Here’s a breakdown of common channel incentive programs and when to use them:

• Sales Incentives – Best for keeping partners motivated and aligning sales targets with rewards.
• SPIFs (Sales Performance Incentive Funds) – Useful for short-term sales boosts, such as clearing old inventory.
• MDFs (Marketing Development Funds) – Helps drive awareness for new products by funding partner-led marketing efforts.
• Rebates – Encourages sales by influencing buyer and seller preferences.
• Co-op Marketing Funds – Requires partners to invest alongside the company, typically offered as reimbursements rather than upfront funds.
• Deal Registration Incentives – Ideal for high-value transactions (e.g., real estate, automotive) where incentives are tied to deal closures.
• Value-Added Reseller Incentives – Encourages cross-selling of complementary products.
• Referral Incentives – Helps expand market reach by rewarding partners for bringing in new customers.
• Enablement and Training Incentives – Ensures partners have in-depth product knowledge, leading to better customer interactions.
• Loyalty and Retention Incentives – Strengthens long-term relationships with high-performing partners.

Most companies, including Huawei, use a mix of these programs to maximize results. Combining different incentives can create a well-rounded approach that keeps partners engaged and aligned with business objectives.

Channel Incentive Program Best Practices

Creating an effective channel incentive program requires careful planning, execution, and ongoing evaluation. Here are some best practices to consider:

1. Define Clear Objectives: Establish specific, measurable, achievable, relevant, and time-bound (SMART) objectives for your channel incentive program. This will help you focus your efforts and measure the program’s success. For example, you might set a goal to increase sales by 20% in a specific region within six months.
2. Choose the Right Incentives: Select incentives that align with your channel partners’ needs and preferences. This may include monetary rewards, training programs, marketing support, or exclusive access to new products. Understanding what motivates your partners is key to designing an effective program.
3. Communicate Effectively: Communicate the program’s objectives, rules, and benefits to your channel partners. Ensure they understand how to participate, what they need to do to earn incentives, and how they will be rewarded. Regular updates and transparent communication can help keep partners engaged.
4. Set Realistic Targets: Establish achievable targets for your channel partners. This will help them stay motivated and focused on selling your products. Unrealistic targets can lead to frustration and disengagement, so it’s important to set challenging yet attainable goals.
5. Monitor and Evaluate: Regularly evaluate your channel incentive program’s performance. Use data and feedback to identify areas for improvement and make adjustments as needed. This ongoing evaluation helps ensure the program remains effective and relevant.
6. Provide Ongoing Support: Offer ongoing support and training to your channel partners. This will help them stay up-to-date with your products and services and provide excellent customer service. Continuous education can empower partners to sell more effectively.
7. Recognize and Reward: Recognize and reward your channel partners for their achievements. This will help build strong relationships and motivate them to continue selling your products. Public recognition, awards, and additional incentives can reinforce positive behavior and performance.

Following these best practices can help you create an effective channel incentive program that drives sales, increases market share, and builds strong relationships with your channel partners.

Implementing a well-thought-out incentive program can be a game-changer for your business, ensuring your partners are motivated and aligned with your business goals.

Reward Theory: What You Need to Know

A study by the Incentive Research Foundation revealed that channel partners of various ages and genders value rewards in distinct ways.

They have individual preferences regarding how, when, and in what form they believe they should receive rewards. Grasping this reward theory can enhance your understanding of partner preferences, allowing you to reward them effectively for improved outcomes.

These are the conclusions of the theory:

• People prefer non-cash rewards more than cash rewards. 62% of them said they liked tangible rewards more than cash.
• The study showed that experiences like traveling and events are better preferred.

The study identified four categories for presenting rewards: Big Show (large events), Little Show (workgroups), Peer-to-Peer, and Private Note, along with how people perceive each category

• Big Show was liked more by non-salespeople and less by salespeople.
• Men were more inclined towards the Big Show than women.
• Women were less interested in Private Notes but more inclined toward Peer-to-Peer.
• Like Women, the millennials preferred Peer-to-Peer presentations,while the GenX liked Little Show.

Key Takeaways

• The per-person incentive budget is rising. Ensure that your partners are content and feel valued.
• Incentives give your partners a reason to stay with you. They are also a great way to increase loyalty and trust, which can directly affect your business.
• Different incentive programs serve different purposes. You must understand your goals and choose a program that meets them.
• There are several types of programs. Before picking one up, study it in detail. Research what goals it serves, the challenges, and how to overcome them. Go through case studies and understand how a particular program works.
• Experimenting doesn't harm anyone. Try different ways and understand what works best for you. Talk to your channel partners to understand what they like the best. This will give you a clearer idea and make partners feel heard and happy that you asked for what they'd like.
• People of varied ages, genders, and circumstances appreciate rewards differently. Read this research report by the Incentive Research Foundation to understand your partners and their choices.

Feeling overwhelmed? There's no need to worry. incentX recognizes that executing these programs can be daunting. Our expert team is here to assist you in creating a channel incentive program that delivers optimal results for your business.