The Channel Partner you Assume to Be Generating the Most Volume Is Not Always the One Producing the Most Profit
Partner scorecards are an excellent channel partner management tool. Unfortunately, they are not utilized correctly.
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 is at the forefront of this issue. Most manufacturers are deteriorating their profit margins because of this issue.
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, creating scorecards focus more on the profitability of each partner and less on the data.
Too often, manufacturers’ main concern hinges on the volume purchased/sold by a partner. These manufacturers have fewer concerns about the operational profitability that each partner generates. In other words, who you assume to be the most profitable channel partner is not always the one producing the most profit.
The false narrative 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. This is true even if these smaller partners’ 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 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.
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.