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Partner Scorecards Evaluating Channel Effectiveness

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Partner Scorecards Evaluating Channel Effectiveness Powered By Docstoc
					2007             Autumn

Channel Management

                                                                                         CCI provides software and services to
                                                                                         help marketers manage, measure, and
                                                                                         optimize sales channel performance.

Partner                                      measure the profitability and true
                                             potential of their channel partners. Our
                                                                                         • The inability to effectively measure
                                                                                         sell-through volume, particularly in a

Scorecards:                                  own anecdotal data, as well as more
                                             formal research conducted by other
                                                                                         multi-tiered, multi-distributor channel
Evaluating                                   parties, indicates that the inability to    • The inability to correlate marketing
Channel                                      secure meaningful, actionable insight
                                             about partner and program activity is
                                                                                         program participation to incremental
                                                                                         sales gains (and more importantly
Effectiveness                                the #1 issue among strategic sales and
                                             channel managers. Like the old adage:
                                                                                         the direct and indirect cost of those
                                                                                         marketing programs).
PART 1                                       “I know that half of my advertising is
                                                                                         • Disparate systems and processes
                                             going to waste, I just don’t know which
                                             half.” Channel managers continue to         that can’t really provide roll-up
As we head into another new year, it
                                             launch new channel programs to a            reporting across a number of
seems one of the new “Buzzwords”
                                             more diverse channel organization           dimensions—because they were really
being discussed among clients and the
                                             with little insight as to what’s working    never designed to do so.
industry in general is “scorecards”.
Interestingly, the use of the term
as it relates to vendor and channel
communities means different things                                                       The technology and
depending on the industry.
                                                                                         acumen are now available
For most packaged goods (food and
drug) and other consumer good                                                            to vendors of all types to
manufacturers, the use of the term                                                       capture key insight about
often refers to vendor scorecards.
Specifically, how the retailer scores the
                                                                                         their channel partners,
vendor across a number of attributes,                                                    and individual channel
including; delivery and stocking policies,                                               programs.
marketing programs, and other metrics
related to category profitability. It
is then up to each vendor to plan a          and why. This is particularly frustrating   Well, we are at the dawn of a whole
solution that will improve their failing     as product life cycles, customer            new era. The technology and acumen
areas or they will risk being de-listed      needs, and channel business models          are now available to vendors of all
from the retailer’s merchandising            are changing more rapidly than ever         types to capture key insight about
assortment.                                  before. Essentially, this enhances the      their channel partners, and individual
Alternatively, for most business-to-         need for accurate, real-time insights.      channel programs.        Armed with
business marketers, a partner scorecard      After all, doubling sales volume vs YAG     this insight, vendors can achieve
refers to the vendor’s evaluation of         is really no accomplishment if the cost     greater channel optimization through
an individual partner or reseller as         to do so consumes all the contribution      improved program efficiency, partner
a means to gauge profitability and           margin and ties up your resources. But      effectiveness, and faster speed to
growth potential. These Partner              how do you know???                          market (or at least improved reaction
Scorecards are the primary subject of        In the past, factors that have limited      time).
this article— and a focus at CCI.            the ability to develop valid metrics have   Through CCI and other companies, the
For the 23-years of CCI’s existence,         included one or more of the following:      technology exists to capture POS data,
vendors have been seeking a way to                                                                           Continued on Page 4
02                 Business

 Bridging the Exchange Rate Gap for
 Global Channel Program Payments

               If you have been listening to the financial news or traveling abroad, you know that
               the exchange rates between the US Dollar (USD$) and most other currencies have not
               been in our favor. The value of the dollar has been dropping faster than Mr. newton’s
 apple. For instance, at the turn of the new millennium the Euro (€) was valued at a mere 86
 cents. As of this writing, each Euro costs in excess of $1.46 to purchase, and most experts
 expect it to push $1.60 in the not-too-distant future. If so, the once mighty dollar will have
 experienced nearly a 50% slide in a 7 year span.

 What’s the impact on these fluctuating rates for channel marketers?

 The answer turns out to be “a lot” if you       (or retailer) gets all the money he/she      a big deal if the USD was indeed growing
 are responsible for global program fund         expected, but the manufacturer absorbs       stronger. however, in today’s declining
 management. For instance, in the real-          all the risk of the resulting currency       U.S. market this fluctuation will have the
                                                                                              finance people screaming that marketing
                                                                                              department went over budget relative to
                                                                                              the original commitment of $10,000. (We
                   Time Period   Action                          Cost $        Cost €         know, we get the phone calls.) The $680
                   January 2007 Completed Prior Approval         10,000        7800           difference between January and May in
     TABLE A

                   March 2007    Complete activity               10,450        7800           TABLE A may not seem like much, but
                                                                                              when you are dealing with $ Millions,
                   April 2007    Submit claim                    10,554        7800
                                                                                              the impact can influence earnings per
                   May 2007      Approve for Reimbursement       10,680        7800           share.
                                                                                              Want to keep the finance people happy?
                                                                                              Well, then try the approach in TABLE B
                   Time Period   Action                          Cost $        Cost €         We call this table (b) the base centric
                   January 2007 Completed Prior Approval         10,000        7800           currency model. In it, the finance people
     TABLE B

                                                                                              get off the marketing department’s
                   March 2007    Complete activity               10,000        7500
                                                                                              back because the local currency value
                   April 2007    Submit claim                    10,000        7450           is adjusted against a constant USD.
                   May 2007      Approve for Reimbursement       10,000        7350           however, in doing so, the result is a
                                                                                              universe of unhappy channel partners
                                                                                              who are complaining they haven’t
 world example shown in TABLE A, which           fluctuation. If they were to reimburse for   received their just due as initially
 date or action would a manufacturer             activities based on the latest exchange      approved.
 use as a basis for reimbursement of the         rate, they actually pay $680 more for        Truly decentralized programs don’t
 approved activity?                              the activity than they otherwise would       experience these problems at the
                                                 at the time the actual prior approval was    partner level because the programs
 We call this example the partner centric
                                                 submitted. This fluctuation would not be     are funded, administered, and paid in
 model. And, in this example, the reseller
                                                                                      What’s new                                                              03

local currency—with no need to “roll up”                                                 The Channel Champion:
accounting to a central currency.                                                        Craig DeWolf
For the rest of us, the good news is that there                                          VP Sales & Marketing for CCI
is a variety of ways to mitigate currency risk
and contribute to a true “win/win” scenario
for your financial people and your channel
                                                  You may have noticed a new title for the newsletter. Even more profound is the new
For all international programs funded with        face authoring this regular column. What’s going on? Well, a lot really.
USD, the simplest –and most accurate way of
                                                  Back in 1983 when we first started as Co-Op Communications Incorporated we
assuring congruity between currencies is to
                                                  specialized in offering administration of Co-Op, MDF, and other channel incentive
buy the foreign currencies simultaneously
                                                  programs. The nature of channel programs has evolved, and there is an expanding
with the allocation of monies to your channel
                                                  array of program types required to effectively manage your sales channels. We
partners. This way, you know exactly how
                                                  understand the importance of managing all your channel programs in one tool for the
much your allocation is worth at the time
                                                  convenience of a centralized resource. More importantly, however, we understand that
of approval. however, this requires that
                                                  effective channel marketing requires measuring partner performance and acumen
you pre-fund accruals, effectively tying
                                                  for all your channel programs. To that end, CCI is proud to introduce an expanded
up monies your financial wizards would
                                                  solution set to help manage, measure, and optimize the array of programs required
otherwise have plans for.
                                                  by effective channel marketers. We’re proud of our ability to offer complete channel
A second method involves a futures                management--and indeed-- complete channel insight. This expanded solutions set
contract with your bank and/or program            covers the full spectrum of channel marketing programs, including:
administrators to guarantee exchange
                                                          Incentive                  Opportunity                    Partner                 Partner
rates for a specified period of time. In this            Management                  Management                    Marketing              Management
scenario, it is the banks who absorb the risk
                                                    •   Co-op/MDF              •   Lead Management          •   Contract/Renewal    •   Partner Profile
by locking-in exchange rates without the                                                                        Management              Manager
                                                    •   SPIF/Rebate            •   Deal Registration
pre-funding burden.                                                                                         •   Creative Manager/   •   Partner Business
                                                    •   Stretch Goal Rewards   •   Referral Management
                                                                                                                AdBuilder               Planner
Lastly, daily reconciliation of exchange            •   Trade-in Programs      •   Special Price Requests
                                                                                                                                    •   Partner Scorecards/
rates can keep the reporting of accruals                                                                                                Report Manager

and balances accurate in the base currency
while keeping claims and payments accurate        Delivering channel insight begins with the ability to deliver meaningful metrics
in the partner’s currency. Balances need to       about your sales channel performance by capturing sales, promotion, and program
be calculated using daily exchange rates          data across a number of touch-points. The information captured from all the above
to allow for rate fluctuations. Using this        activities can be combined with your POS sales data to create partner and program
approach, the fluctuations still occur but        scorecards. The result is that channel managers will now have the ability to conduct
surprises are minimized because reporting         quantitative analysis on partner and program performance.
is generally more accurate for partners and
financial managers alike.                         It takes more than software to deliver channel insight and make informed business
                                                  decisions. So we extend our Professional Services to help clients design programs
Relative pros and cons aside, represented         using our vast experience and library of best practices, and analytic capabilities to
above are 5 distinct methods of financial         help track program performance against goals.
accounting for global channel programs.
Often, the initial choice was made because        And finally, the astute will also notice a different head shot above—that’s me: the new
of accounting mandates rather than channel        Vice President of Sales & Marketing. I’m very excited to be in this role at CCI. My
marketing best-practices. With the currency       relationship with CCI started about 10-years ago when I was General Manager of J.
fluctuations we are experiencing today, it        Brown/LMC Group, a $250MM division of Grey Advertising Worldwide that specialized
might be best to re-evaluate your program         in Channel Marketing for clients in a variety of industries. I have been involved in
financials. You may find that an alternative      the development of channel programs since 1985—just as channel marketing started
approach is preferred in today’s economy,         being recognized as the specialized field it has become today. Through the years, I
as well as for maintaining a “win/win”            have had a long-standing partnership with CCI. Finally, one year ago I was persuaded
relationship with your channel partners.          to come on board because the potential “fit” was obvious to all parties then… and
                                                  indeed it is now.
 04          Scorecards continued

                                                                                               Solutions for complete channel insight.
                                                 channel optimization lies not in the
  Continued from Front Page                      breadth of information you can capture,

  correlate program participation with its       but the understanding of which leading
  sales impact, capture channel profile          indicators make sense for you in making
  characteristics (both reported and             the right business decisions. It is our
  behavioral) and provide a single conduit       experience that these indicators for
  to manage and track multiple programs          program and partner performance
  with cross-functional reporting.               can be vastly different depending
                                                 on the type of product you sell, and
  Indeed the pendulum has swung—in fact,
                                                 your channel make-up. For instance,
  the industry is in danger of collecting too
                                                 commodity products with short sales
  much information(!) It is now possible to
                                                 cycles are going to require different
  track sales contribution not just at the
                                                 performance metrics than expensive
  reseller company level, but the individual
                                                 leading-edge technology products with
  sales rep level. This includes effective
                                                 long sales cycles—particularly if the
  sales volume, close ratios, length of the
                                                 latter requires special channel skills and/
  sales cycle, new vs. existing clients sales,
                                                 or certification.
  new technology penetration, special
  skills and certifications, and much-much       Future articles on Partner Scorecards
  more.                                          will focus on the considerations that will
                                                 help you decide which metrics are right
  I know what you’re thinking: “We’ve
                                                 for your organization. We will also cover
  finally reached the holy grail of channel
                                                 the source of that information. We do
  optimization. When can I start?”
                                                 hope you stay tuned.
  Whoa there, Trigger.     The real key to

Channel Management

Autumn Edition
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