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Top 10 Ways You Might Be Wasting Channel Investment


Published on

6/26/2013. hawkeye Channel Whitepaper

Published in: Business, Technology
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Top 10 Ways You Might Be Wasting Channel Investment

  1. 1. contents: 1. Failing to update your partner base.............................................2 2. Neglecting to set clear channel goals across programs..................3 3. Making it difficult for partners to do business with you................3 4. Low utilization rate of your MDF program........................................4 5. Assuming your CAMs are well-trained...................................5 6. Failing to align programs with greater channel strategy................6 7. Underinvesting in the channel.......6 8. Lack of a data-driven approach....7 9. Not incenting across the sales cycle.............................................7 10. Focusing on quantity over quality.........................................8 Conclusion........................................8 Whitepaper Channel Investment Gone Astray The top 10 ways you might be wasting your channel investment Many things keep CEOs, CFOs and Channel Chiefs up at night. At the top of that list is whether the millions of dollars they invest in channel recruitment, partner enablement and channel management positively impact indirect sales growth and profitability. Often, they wonder if their partner programs go above and beyond what partners expect or if they’re just “table stakes.” Are the millions of dollars they invest in MDF generating an incremental lift in sales or would they have seen the same results through organic revenue growth? Is the money they spend on partner enablement programs actually motivating partner behavior? Most CEOs, CFOs and Channel Chiefs are faced with these questions – but you don’t have to be. Ensure you aren’t making any of the 10 mistakes shared in this whitepaper– so you can be sure your programs are operating at peak performance. According to a recent Sirius Decisions report, companies that generate more than 60% of sales from indirect channels spend anywhere from 1 – 5% of revenue on channel marketing programs and resources. Let’s put that in perspective – a $10 billion company may invest as much as $400 million on channel marketing. That’s a lot; wouldn’t it keep you up at night if that kind of money was going to waste? $ £ €
  2. 2. Reality check: channel marketing spend. Channel marketing budget as % of revenue* Company Size % of Revenue % Split: Program/Personnel $100M-$1B 2%-4% 50/50 $1B-$5B 3%-5% 55/45 $5B-$10B 1%-4% 60/40 $10B-$20B+ 1%-3% 70/30 *For companies with greater than 60% of revenue through channels Source: SiriusDecisions Compared to consumer goods companies – who are able to track and measure ROI on every dollar spent on consumer marketing programs and promotions – the technology and telecom industries are still in their infancy in terms of establishing sound and measurable channel investment goals and tracking ROI. Even with basic partner and program reporting capabilities, vendors like you still struggle to pinpoint positive changes to partner profiling, segmentation and partner enablement programs. As a result, companies often end up wasting millions of dollars each year by failing to invest their budgets properly. The following are the 10 most common channel investment mistakes we see – and how to fix them. 1. Failing to update your ideal partner profile and sticking with the same partner base you’ve had for several years and assuming that the profile of the partners you need in your partner base and the partners you recruit hasn’t changed. When was the last time you re-assessed the types of partners you need, recruited new partners or evaluated your current partner base? Did you use a proven methodology to ensure you have the right partners in your programs? If your programs are comprised of the wrong partners then your channel investment is being wasted. As a result, it’s imperative to target and onboard the right partners. The solutions and services you offer may change over time and so do partner business models and their capabilities to sell and service your solutions. Companies with successful channel programs acknowledge these changes and react to them. This is especially important today, in a time when we’re seeing a dramatic shift from (re)selling products to selling ongoing services and from a one-time transaction based business model to a cloud-based recurring revenue model. If your company is transitioning to a largely cloud based solutions portfolio, you’ll notice many of your partners aren’t able to make the move with you. In fact, research agencies are predicting vendors will only be able to “bring along” 20-30% of partners. This means you will need to identify companies in your partner base who have the capabilities to adapt to selling and supporting your new offerings. You will have to “fill the gap” with a new breed of “born in the cloud” partners. If you want to ensure your partner base is comprised of companies built to succeed in this current market, now is the time to implement a quantitative partner profiling, scoring, and value ranking methodology. 2
  3. 3. Below is an example of a partner profiling score sheet. 2. Failing to set clear channel objectives while looking at partner enablement goals holistically across all partner programs. Most technology vendors have table stakes partner programs in place but would benefit from offering more comprehensive programs that are part of a stronger overall channel vision. You can start building a solid vision by defining: ­¡ The top 3-5 goals for indirect channels and your partners. ­¡ The top 3 strategic goals for the company directly tied to your channel investments. ­¡ Key objectives changing as a result of cloud transformation. ­¡ Whether you’re truly motivating partners to achieve these goals. The only way to truly do this is to run a thorough (re)assessment to find partners who possess the capabilities to support your company’s strategic goals – and determine how you can best influence and support their business models in terms of revenue and profitability. 3. Making it difficult for your partners to do business with you. You obviously want to make it easy for your partners to work with you – but likely many aspects of your channel programs make it difficult for partners to do their jobs. Partners struggle with content overload, lack of targeted content, complex partner portals and the dearth of clarity about how they can accelerate their business with you. These challenges lead to low program utilization, declining revenues, and partner disengagement. In short, 3
  4. 4. 4 making it as easy as possible for your partners to enroll and participate in your programs, and profit from the partnership, ensures your investment is engaging partners. This is a critical aspect of building relationships, as partners become increasingly selective about the vendors they work with. We’ve seen our clients experience a decrease in the number of key vendor-partner relationships due to partners falling by the wayside as a result of channel transformation. A meaningful improvement in the partner experience involves more than a partner portal with single sign on. A surefire way to increase partner program utilization is to offer targeted content via your partner portal and to provide partners with: ­¡ A 360 degree view of program eligibility and requirements. ­¡ An overview of the programs they participate in. ­¡ Benefit accrual breakdown and status. ­¡ Steps to achieve a higher level of program benefits. Generic program lifecycle & infrastructure elements. Targeting content by partner tier and providing partners with a 360 degree view of their relationship with you also makes it easier for them to do business with you. 4. Assuming a low utilization rate of your MDF program is “just the way it is in this business.” While the average MDF utilization rate in the technology sector is in the 50-60% range, there are vendors who consistently score in the 80% range or higher. Many vendors, maybe even you, take low utilization for granted, without exploring the roots of the problem. Many things can be at fault but often MDF funds go unused due to: ­¡ Programs that are hard to understand and difficult to administer ­¡ Lacking easy to implement marketing campaigns ­¡ Poor alignment with partners’ target market ­¡ Emphasizing the wrong marketing activities Membership Statement Budget Mgmt Benefit Statement Set-Up ­¡ Program Rules ­¡ Approval ­¡ Admin Report ­¡ Partner Reporting Eligibility ­¡ Program Level ­¡ Promo Level Capture ­¡ What Activity ­¡ Capture Method ­¡ Source of Data Calculate ­¡ Calculate Performance ­¡ Incentive Structure Approve ­¡ POP ­¡ Workflow Reward ­¡ Cash ­¡ Credit ­¡ Merchandise ­¡ Marketing Funds Wallet Program Communications/Alerts Analytics
  5. 5. 5 You must let partners choose from a set of integrated marketing “plays” or campaigns to drive demand. Some vendors run a marketing concierge service to assist partners in the execution of partner led, integrated marketing campaigns. Cisco provides marketing training seminars and certified partner marketing staff to support partners in the execution of their marketing campaigns. Look at MDF programs holistically and align MDF program goals and content with other programs such as Rebates and Incentives to drive towards the same strategic objectives. And finally, you need to identify the right marketing activities that generate maximum demand (see table below). 5. Assuming your channel account managers are “pros” who know how to coach and motivate partners when they haven’t been formally trained. In most cases 5% of partners drive at least 50% or more of the business – this is probably the case in your channel. Those partners are usually “managed” by someone at your company, and making sure it’s a professional Channel Account Manager (CAM) can have a significant influence on partner and program performance as well as program utilization. It is surprising to note, however, that many CAMs receive little or no formal training. They often learn on the job but lack the coaching skills and channel expertise to “sell through” partners. Your company likely employs a large number of CAMs, making them an expensive resource you want to ensure is 100% effective in driving profitable relationships with your partners. Developing a formal training program that teaches CAMs and PAMs how to best do their jobs will enable you to maximize their value. Events Incentives/spiffs (reseller, end user, distributor) Advertising: online advertising and search Training Email and eNewsletters Catalog Telemarketing Website Advertising: print Collateral Print direct mail/newsletters POS materials Base: 17,952 projects representing more than $178 million for partners of multinational/global high-tech companies Source: hawkeye Channel, July 2012, activity for channelMDF program January – June 2012 Forrester Research 22% 19% 14% 9% 7% 4% 4% 3% 3% 2% 1% 4%
  6. 6. Your training program should cover the four fundamentals of PAM function: ­¡ Champions Value Prop, goals & objectives ­¡ Aligns goals, mediates disputes ­¡ Coordinates resources ­¡ Drives demand through partners ¡ Meet/exceeds partners’ sales quota ­¡ Manages sales pipeline ­¡ Coaches partner sales, marketing, tech teams ­¡ Leverage programs, funding, tools, support, training ­¡ Gains partner and staff mindshare Ambassador Sales Leader Coach ­¡ Understands the marketplace, competition ­¡ Understands company and partners’ business models ­¡ Develops and manages business plans Business Leader 6. Your individual partner programs are not aligned to achieve a greater channel strategy. Failing to align your programs often leads to you spending more than you need to. For example, your rebate program may provide incentives to achieve certain revenue, growth goals, or market penetration objectives at the partner organization level, while your incentive program for individual partner employees may target completely different objectives. In many cases, partner programs such as MDF, Deal Registration, Rebates and Rewards have been designed with a singular focus on the individual program objectives while losing sight of the strategic goals the company has set for the channel. When you’re able to strategically target certain objectives through all of your programs at once you’re more likely to spend efficiently. This is true because investment in one program will drive the shared goals of all of your programs. 7. Lacking the resources or “underinvesting” in the channel. Whether it is a result of budget cuts or something else, some companies “underinvest” in the channel and therefore never achieve their indirect sales goals. In other cases, they may lack the resources or the alignment of those resources to effectively enable and motivate their partners to market and sell their products/services. The channel can generate amazing revenue but you can only get so much out of it without proper investment. Everything takes time and money – finding and maintaining the right partners, developing and running effective programs and employing the staff to oversee all of it is a major investment which allows the entire process to work. A lack of channel investment results in a lack of effective programs and tools that enable partners to be successful. According to Sirius Decisions, the best practice for allocating the appropriate funds for channel marketing is reflected in the chart shown on page 1. Companies who generate most of their revenue through the channel typically spend anywhere from 1 – 5%of revenue on channel marketing. Smaller companies or new entrants to the channel tend to spend less on technology and use internal resources to 6 MDF Demand creation, events Deal Reg Product discount for deals closed Incentives Individual Sales Goal Points Rebates Points towards revenue goal Quarterly goal: 10 orders, $1M The image below is an example of how aligning different programs in support of a specific sales goal or vertical market can be achieved with the right combination of program elements:
  7. 7. 7 develop marketing programs (50/50 split), while larger companies (> $5B) gain greater leverage through the use of technology to support content distribution and campaign delivery, and use external agencies wherever available to scale globally. 8. Lack of a data-driven approach Without the ability to accurately measure partner and program performance against your goals, your channel programs are destined to fail. Channel transformation has made measuring channel performance more critical than ever – you need to know which programs and promotions deliver incremental sales lift and which ones don’t. You need to segment, value rank, and tier your partner base to align partner performance with the right level of program benefits. Data driven management is essential to succeeding in today’s extremely competitive marketplace and it all starts with clean data, from four main sources: 360 degree partner view: ­¡ Has this partner redeemed? ­¡ Are they actively earning? ­¡ Has this partner enrolled or registered to participate in the program ­¡ When did they enroll? ­¡ Time/Date stamped ­¡ Amount type Program Participation Data Enrollment Data Transactional Sales Data ­¡ Competencies ­¡ Vertical industries served ­¡ Company descriptors Partner Profile Data Bringing these four sources of data together gives you a 360° view of partners and their participation (or lack of participation) in the program—and in aggregate, a 360° view of your old channel program Assuming you have these sources of data available to you, the next step is defining meaningful analytics and providing the kind of reporting to channel management that enables them to make informed channel investment decisions as shown below 9. Failing to provide incentives at all stages of the sales cycle. In the traditional channel model incentives were offered to partners for closing deals but the rapid growth of cloud based solutions has necessitated a new model. Rewarding partners for closing deals is no longer enough. Partners should be rewarded for engaging in lead and sale generating activities, not just for the sales themselves. You should provide a mix of individual, team and company level rewards to motivate your partners to manage deals from initial lead to closure. Combining rebates and rewards programs into a single, points-based solution will enable you to align incentives across the entire sales cycle and more easily manage your programs. Additionally, you must ensure all stakeholders are aligned and derive tangible benefits through earning and
  8. 8. 8 redemption opportunities that support your partners’ business models. Finally, reward incremental business through quotas but remember these two rules ­¡ Reward revenue growth, not revenue attainment ­¡ Do not reward existing/recurring business 10. Quantity over Quality. We have the tendency in our industry to adhere to the old adage “the more you throw at them (partners) the more will stick.” Partners are constantly bombarded with content, promotions and new or revised partner programs. It seems channel marketers feel the need to justify their positions by creating new partner programs and promotions seemingly every week. This is counterproductive – partners don’t have the bandwidth to absorb the avalanche of content, let alone put it to good use. Consider the following: ­¡ The average partner does business with six top-line vendors every day and many more secondary vendors ­¡ There is significant partner consolidation and attrition underway in the industry, resulting in increased competition among vendors for partners and mindshare ­¡ Partners are reducing the number of vendors they do business with Think “less is more” and quality over quantity with regard to partner engagement: ­¡ Tightly manage partner communications. Consolidate, rank, and prioritize all communications to partners ­¡ Target relevant content by partner tier and program participation rather than blasting content to the entire partner base ­¡ Automate partner programs – provide partners with ease of program participation and efficient processes ­¡ Consolidate partner programs – clearly identify the top three strategic goals for the channel and align partner motivation and compensation with these goals using a few targeted programs Conclusion Rapid changes to the technology industry and to channels of distribution necessitate more frequent reviews and analysis of your partner base (how many and what type of partners do I need?) and your programmatic approach to enabling and motivating your channel partners. Only a data driven channel management approach that helps you identify how and where to invest will enable you to make the changes necessary to ensure that your channel investment is driving productive partners and generating increased sales and revenue. You must be aware of the common pitfalls that require investment but fail to deliver the results you expect. With this knowledge you will be able to avoid these areas of wasted channel investment and achieve greater channel success. Feel free to contact us at if you need help ensuring your channel investment drives results or if you want to perform a health check on your programs or partners. Whatever your channel need, we can help.
  9. 9. Global companies with indirect sales and channel partners rely on hawkeye Channel to increase their channel ROI. North America Centerpoint, Cascade East 20819 72nd Ave S. Suite 725 Kent, WA 98032 +1 800 981 9154 EMEA 1st Floor Otterman House 12 Petersham Road Richmond-upon-Thames Surrey TW10 6UW +44 208 614 9593 APAC 3 Temasek Avenue 21-00 Centennial Tower Singapore 039190 +65 6549-7498 LATAM 2332 Galiano St. 2nd Floor Coral Gables, FL 33134 +1 305 728 7054 hawkeye gives no warranty or representation as to the accuracy, completeness or legality of the advice contained in this paper, and any warranties implied by law are hereby expressly excluded to the fullest extent permissible. © 2013 hawkeye, all rights reserved. about hawkeye Channel hawkeye Channel provides software and services that drive channel revenue growth for enterprise marketers who sell through indirect channels. With a unique blend of robust channel programs and expertise, hawkeye Channel helps clients easily integrate with their CRM platform, accurately measure channel performance and optimize channel incentives on a global scale. contact us Contact us today to discover how we can help you get the maximum return on your channel investment.