Over the last several years, manufacturers have increasingly created tiered channel programs. I refer to the tiered strategy as a “precious metals” approach to channel design, because so many companies label their tiers as Platinum, Gold, Silver, etc.

Generally, I applaud this trend. Treating partners differently reflects their inherent variability. However, creating a successful tiered strategy takes some work.

First, volume should not be the only requirement to reach a tier. A volume-based program can lead to a spiky rather than smooth order flow, channel conflict, and gray-marketing. Instead, manufacturers should consider other partner attributes, like market share/loyalty, number of trained technical and/or sales people, submission of a business plan, etc.

Second, before creating a tiered program, manufacturers may want to separate their channels by business model. For example, wholesalers, system integrators, and retailers perform vastly different functions for vastly different end-customers. A single-tiered system might not reflect nor properly motivate such different partners.

Third, tiers must be reachable. If the requirements for “Platinum” level are beyond the reach of most “Gold” partners, for example, the program will not change behavior. Furthermore, manufacturers need to provide tools for partners to reach higher levels. These tools could include accessible training programs, support from account managers, marketing funds and materials, etc.

Poorly designed tiered programs will fail, mostly by channel neglect. The most common causes are poor program launch and communication efforts, overly complex rules and requirements, and insufficient or inappropriate benefits for reaching a tier. If you have any other thoughts about tiered channel programs, please feel free to call or comment.