How far does a vendor dollar go in the channel?
- 04 May, 2018 09:00
Most channel executives are familiar with the dreaded question from the company CFO or CEO: What did we get for what we spent in the channel last quarter?
Channel budgets have never been under more intense scrutiny, and the need to justify the return on investment (ROI) of expenses is a continuous area of concern for channel chiefs.
Two channel budgets that are most often under the microscope are rebates and marketing expenses.
Channel rebates ROI:
Because channel rebates align to specific revenue targets, it is possible to model the revenue attributed to the payment of rebates versus prior year.
Channel teams typically create a comparison of a partner’s revenue growth either quarter-to-quarter or current quarter versus prior year and then calculate the ROI on channel rebates based on the incremental revenue earned versus rebates paid.
This straightforward analysis gives CFOs and CEOs some level of expense justification for these significant budgets.
Rebates don’t always generate the highest ROI relative to alternative channel investments, but the impacts are easy to measure and model.
Channel marketing ROI:
On the other hand, it is difficult to obtain an accurate measure of ROI with channel marketing programs, particularly with MFD-funded, partner-led marketing programs that are executed using third-party vendors.
The four biggest challenges for measuring channel marketing ROI are:
- Fragmented approval process: Many programs have distributed approval processes that do not lend themselves to consistent planning and forecasting estimates
- Fragmented execution: MDF-funded partner marketing programs often use several vendors to execute campaigns and generate qualified opportunities, which results in leads of varying quality
- Fragmented systems: The vendors that execute partner-led marketing programs typically lack unified lead capture and qualification systems
- Fragmented reporting: Because of the lack of coordinated marketing execution, the leads that are generated are not consistently followed-up on, progressed, and reported by partners
Which leads to this advice: Before you launch any marketing program, you should ask: Is there agreement across my team and organisation of what success means?
This question is often unasked and unanswered, and for a lot of good reasons.
For a program to be successful one must start with a goal, but goal setting takes deep thought, and that takes time, which most of us in the channel don’t have. Sometimes goal setting involves a lot of guessing, and in some companies, a wrong guess can be career-limiting.
Measurement in the channel is difficult, but marketers should welcome it. In the first place, accountability is good. A-players hang out with other A-players, and A-playing marketers are confident in their ability to deliver.
Accountability and visibility force the lower performers into the spotlight, where they’ll raise their game or go elsewhere. Either way, it’s better for the company.
By committing to KPI’s and reporting on success, the marketing team will raise its profile with the executive team and the company.
There are some companies that still consider marketing a luxury, and positive results will shift that perception over time. It will also reduce the friction with the sales organisation, who too often look down on marketers.
There’s too much art and not enough science in it for them, perhaps. Real data changes that perception, and it may also ignite important discussions that increase the interlock between the two organisations.
Take the age-old question ‘what is a qualified lead?’
To some marketers, a qualified lead is someone that fills out a form on one of their web pages. To a sales rep, that’s junk. To them, a qualified lead is a deal that closes itself. The truth lies somewhere in the middle, and it’s different for every company.
Begin with the end in mind (Stephen Covey)
Most vendors are struggling to deliver a quantifiable measure of what they are getting for what they are spending on channel marketing. And there are several contributing factors, including poor planning, worse execution, and little to no follow-up.
If this sounds like your company, consider implementing the following approach to get your channel on track. Here are the seven characteristics the ROI-driven partner-led marketing system:
- Well-defined set of partner marketing goals
- Alignment of marketing tactics and budget to achieve these goals
- A detailed lead waterfall forecast that estimates the impact of this plan
- A calculation of estimated revenue and ROI that will result from this campaign
- An automated process to capture and publish leads and deal registrations in CRM
- A deal progression and pipeline reporting system to monitor outcomes
- A post-campaign ROI verification process for leads, revenue, and ROI
The best way to get started is to help your partners create a set of goals for their overall business, and help them figure out how marketing will support the achievement of these goals.
To set your expectation properly, remember that not all campaigns are equal; they’re not all going to be rock stars. The adjustments you make along the way will make the difference.
Say your company has set a goal to drive $10 million in channel revenue this year, and you’re tasked with creating the marketing generated opportunities that will deliver on that revenue target. Let’s work backward to find out how many you’ll need to deliver.
No doubt there will be some guesswork in this exercise. For example, in companies with a lot of different products, it’s difficult to know what the average deal size is.
It’s also difficult to predict how good your partners are at selling; not all partners are created equal. We contend that it’s best to create a bleak scenario (low response rate, bad close rate, small deals, etc.) and then base your marketing efforts on that. You’ll likely see a better outcome than the model predicted.
Now that you have your overall channel growth and ROI targets defined, it’s time to work with individual partners and build up a plan, partner-by-partner, to achieve these goals.
The great news is there are now unified partner planning systems that will guide channel managers through the seven steps defined above.
Most partner-level marketing planning done today is on spreadsheets or on Microsoft Word documents that are not integrated into a company’s CRM and make it very difficult for systematic tracking, goal setting, planning and performance measurement.
Leading channel organisations are now using integrated systems that guide and manage partner marketing processes from beginning to end.
Steps one and two are completed by the channel partner or in collaboration with the channel account manager (CAM) in as little as 10 minutes.
Once completed, steps three and four will happen either automatically or when the partner registers a deal. This solution allows channel partners to focus on their highest value activities, which is to follow-up on the new opportunities generated.
The integrated system tracks and reports on leads, pipeline, revenue and ROI automatically.
So, what are the key benefits of a unified partner marketing planning, execution and pipeline management system?
- Simple: In less than 30 minutes, a partner or CAM working with a partner can build an ROI-based marketing plan, submit for approval, and execute by customizing templated marketing campaigns
- Effective: While these campaigns are doing their work, lead and deal registrations that result from these leads are being reported directly in Salesforce for tracking and reporting purposes
- Integrated: Partner marketing planning, execution, performance measurement and Salesforce reporting is all integrated into a unified system
- ROI before and after: Partners can estimate their leads, revenue, and ROI upfront and track actual results after execution automatically
Channel executives are under more pressure than ever before to deliver measurable revenue and ROI from their channel marketing investment. It is no longer acceptable to provide a through-partner marketing automation system to your partners by itself and simply hope for the best.
Any investment in channel marketing must be made with the ability to set specific revenue and ROI targets, directly link to relevant marketing systems to execute campaigns, automatically link leads and deal registrations into the vendor’s CRM and be integrated with partner-level plans to measure campaign performance, leads generated, and ROI.
Anything short of this will result in an uncomfortable discussion between the channel chief and CFO / CEO to the question: What is the return I getting when we put $1 into your channel?
By Gary Morris
Gary Morris is CEO of Successful Channels, a provider of cloud-based channel planning and performance management tools.