Are You Taking in the Right View of your Channel?
Are you measuring the right Channel Business Metrics? For as long as i can remember, one of the most frequent complaints from partners about their vendors is “They just don’t understand my business”. Typically, this complaint can be traced to the vendor’s choice of channel management metrics that fail to provide a full view of the partner.
Channel Business Metrics – A Complement to Channel Program Metrics
Channel Program Metrics are focused on capturing and tracking partner performance for a single vendor. They help to assure optimal levels of investment and, ultimately, successful market results. But, for key partner management, these metrics alone are not sufficient. Therefore it’s important to consider key partner “macro metrics” – the business metrics that go beyond a single vendor view. A valuable complement to the channel program’s highly specific performance metrics, they provide a “40,000 foot” view of key partners’ total businesses and help channel management teams set realistic expectations, create meaningful support programs and evolve to a high-value “trusted advisor” position.
Why Channel Business Metrics?
Channel Business Metrics help vendors:
- Understand the depth and breadth of market access the channel provides. Industry evolution has added complexity to traditional partner business models, making it difficult to understand the business – or businesses — your partner is really in. Business metrics add needed clarity.
- Assess their power position in the channel by providing important information on overall share as well as share of each category.
- Assess the probability of sales effort and of sales success by taking a broad view of asset composition and utilization.
Examples of Channel Business Metrics include:
1. MARKET ACCESS
You want to know: | So you capture these metrics: |
| – Firstly, how important are your target markets to this particular partner? Does the partner sell primarily to these markets or do they have only an occasional focus – or one big account etc.? – Secondly, is this partner a “hunter” that aggressively pursues new business or a “farmer” that sells into a stable account base? (This answer has significant cost implications for the partner. Selling new technology into new accounts, for example, can cost as much as 12 times the cost of selling existing products into existing accounts). | – % of business by business category (ex. equipment sales vs. managed services) – % of business in target verticals, geographies and applications – Number of active accounts and % of accounts by size – Business % by size of account – % of sales from new vs. existing accounts – % of sales that are “greenfield” vs. “aftermarket” |
2. POWER POSITION
You want to know: | So you capture these metrics: |
| – Firstly how much attention will this partner pay to you? – Secondly, does the current program assume a level of importance that is consistent with the partner’s view of its vendors in this category? – And finally, what is the probable rate of program participation we can reasonably expect from this partner? | – Category share of partner’s business – Brand share of category – # of brands in each category |
3. PROBABLE SALES EFFORT
You want to know: | So you capture these metrics: |
| – Firstly, is this business focused primarily on sales or service? – How much sales effort will be focused on our category? – How many sales resources will be available to us? – What is the current capacity of the sales and service organizations? – Is Salesforce’s productivity consistent with the industry? Too high may indicate less technical value being delivered; too low may point to a close rate issue. – And finally if the partner is selling a managed service, what is the capability of the customer service organization? | – Overall Business Margin – Typical Sales Scenario – Salesforce Productivity vs. Industry Average – Sales to Service tech ratio – Service Staff Utilization – Inside sales to outside sales ratio – Pooled vs. Dedicated sales force |
4. PROBABLE SALES SUCCESS
You want to know: | So you capture these metrics: |
| – Firstly is this partner’s overall margin consistent with the effort required to deliver the level of technical value the market requires? – And finally, is the partner’s close rate within industry norms – if not, why not? | – Average time to close – Close rate as a % of bids – Win/loss analysis |
To Conclude
Channel Business Metrics come from multiple sources and can be acquired over time. Ideally, much of the data should be captured in the initial partner selection process, with the application and partner recruiting conversation covering the majority of topics. As the relationship matures and businesses evolve, the quarterly and annual reviews, strategy sessions and real-time program performance metrics will provide additional insight for the channel management team.