Establishing and monitoring the right KPIs allows channel chiefs to prove beyond the shadow of a doubt that selling through the channel is the smart way to go.
By The 2112 Group
Calling all channel chiefs: If you want to prove the channel’s value to management, you’ll need to proactively select appropriate key performance indicators (KPIs) and communicate frequently with your team about the data you turn up.
In a recent Mindmatrix Channel Enablement Webinar, The 2112 Group’s Larry Walsh shared with attendees some KPIs that channel chiefs should add to their portfolio of measurement tools.
Why measure channel performance at all? With vendors assessing their cost structures and more closely scrutinizing their indirect-sales initiatives, channel chiefs are feeling the squeeze from managers (and stakeholders) to make a case for the channel. If vendors can achieve profitability on their own – with their direct-sales forces exclusively – why should they invest dollars and resources in partners? On some level, vendors know they need the channel to address their total addressable markets, but anecdotal evidence isn’t going to put their minds at ease. Concrete data is the key.
“We need data to prove our points to other people,” said Walsh, 2112’s CEO and chief analyst, during the Webinar, “10 KPIs That Demonstrate Channel Value,” citing words of wisdom from management consultants Peter Drucker and W. Edward Demming: “If you can’t measure it, you can’t manage it” (Drucker) and “without data, you’re just another person with an opinion” (Demming). By establishing, monitoring, and reporting on KPIs for the channel, CAMs earn credibility, Walsh said.
But what to measure? Isn’t it a self-evident truth that a revenue-generating channel program chock-full of registered partners is highly valuable to the vendor? Not necessarily. The success of channel partners can’t be distilled down to dollars and cents. Nor does having a high volume of registered partners render a channel program successful.
Walsh reminds us that the 80/20 rule is alive and well in the IT channel, which “isn’t uniform in its performance.” Walsh adds that sometimes the ratio of productive-to-unproductive partners is even more skewed than we might think. In assessing vendors’ channel programs, 2112 has encountered situations where only 10 percent (or less) of partners are productive and the remaining majority make up “the long tail” – that group of partners which are, as Walsh puts it, “opportunistic and not engaged or committed.”
So if revenue generation and volume of partners don’t cue us in to the value of a channel program and its partners, what else can we look at?
Here are a handful of things:
New business: “Partners can rarely open new profit pools, but they do allow vendors to reach into markets they couldn’t serve by themselves,” Walsh said. Channel chiefs should be looking at the number of deals a partner does, the number of opportunities it uncovers, sales conversion rates, and, most important, new logos – businesses the vendor hasn’t done business with before. “The channel is an effective mechanism for [reaching new markets],” Walsh said. “The activity that goes on behind the net revenue is important too.”
Channel cost: How much is it costing the vendor to support partners? Answering that question means looking at things such as average partner compensation, revenue and resource utilization, MDF expenditures, and support and enablement costs.
Sales proficiency: Looking beyond revenue at sales activity is a valuable metric for channel chiefs. Considering deal registrations, rates of attached sales, customer retention rates, and sales support utilization can give channel chiefs a good sense of whether partners are initiating sales or waiting for sales to come to them.
Technical channel enablement: Having partners step up to the plate for training and certification is generally a good thing, but it doesn’t always translate into higher performance, Walsh said. Channel chiefs should look also at how heavily partners are leaning on the vendor for technical resources and support, and at customer satisfaction rates.
Channel impact: This is about pulling it all together to see how much partners are contributing to a vendor’s overall revenue and profitability, market share, and competitive displacement. What is the vendor’s overall channel ROI?
Once KPIs have been established, it’s the channel chief’s job to communicate regularly – and honestly – with managers and stakeholders about those performance indicators, and to put them into context so that higher-ups aren’t left guessing.
“If we can tell a good story and back it up with data, we can prove the value of the channel,” Walsh said. “We can win the support of management teams and gain partner loyalty in the process.”
