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The Channel Partner You Assume To Be Generating The Most Volume Is Not Always The One Producing The Most Profit.
Do you use the following tactics when putting together channel partner scorecards?
Best guess expectations on incentive profit and return-on-investment. Channel POS data you “thought” or “heard,” but never actually “saw” or “read.” 100,000-foot observations made by channel teams that fail to utilize channel partners at scale.
Poor business practices such as these can stem from a variety of channel management issues, however, the lack of adequate and complete partner scorecards (that are readily available for channel teams) is at the forefront of this issue, and manufacturers are deteriorating their profit margins because of it.
Measuring or evaluating the success of your channel is likely flawed when channel partner scorecards are:
1.) Generated with inconsistent, incomplete information that fails to improve the efficiency and/or effectiveness of channel partner performance
2.) Evaluated using rudimentary analytics that is given to you by partners without internal verification
3.) Don’t exist altogether… the satisfaction level of channel partners are likely inferior to competitors.
Why Channel Partner Scorecards are Important
With $70B in channel discounts and incentives spent last year, manufacturers realize the value of driving demand via partner networks.
However, given the growing dependence (and investment) in the channel, creating scorecards spearheads the focus to be more on the profitability of each partner and less on data that is merely scratching the surface (e.g., sales revenue, partner revenue trends).
Too often, manufacturers’ main concern hinges on volume purchased/sold by partner and less on the operational profitability that each partner generates. In other words, whom you assume to be the most profitable channel partner is not always the one producing the most profit.
The false narrative—where “big partners” reap the most attention from their manufacturer—can lead to an erroneous distribution of resources and investments that ultimately affect a company’s bottom line.
In actuality, many times, the smaller partners or “players” produce the most profit for the manufacturer, even if their revenue does not overtly support their significance.
Due to the inconspicuous nature of partner-by-partner profitability, channel partner scorecards serve an imperative purpose concerning the long-term success of channel-driven manufacturers. Without comprehensive portfolios that clearly articulate each partner’s profit/loss ratio, there is little to no validity regarding the justification of channel spending.
Given the ambiguity of their team’s channel partner scorecards, the lack of ‘channel insight’ likely does not fit well with financial executives.
Where Manufacturers Miss the Mark
What a thoroughly funneled channel partner scorecard looks like is something of a mystery. Where manufacturers frequently fumble is assuming they have enough metrics in place to define each partner’s profit-and-loss statement. Ultimately, a true channel partner scorecard provides the whole story—not exclusively whether or not a partner is effective at selling your product.
If obtaining the above information seems like an unrealistic scenario, it’s likely you don’t have the proper resources in place to accurately and efficiently acquire such detailed information. Relying on manual processes and/or ad-hoc data collection methods will not enable you to reconcile the complex configurations and calculations needed to create comprehensive channel partner scorecards.
Without a scalable, centralized, enterprise-ready solution that automatically validates essential channel data (e.g., POS, sales-in-sales-out inventory data, distributor claim validation, deal registration tracking, etc.), manufacturers will have difficulty incentivizing partner performance as well as allocating the appropriate resources via the channel that improves partner-by-partner profitability.