New Ways to Solve Channel Management Complexities

By Michael Kerman

OK, I’ll admit it—I love trees. This summer, I went camping for the first time in years. I forgot how much I love the sight of the tree canopy against the blue sky, providing deep shade even at midday, and the giant cedar towering over tiny saplings, each trying to become the next skyscraping conifer.

Soon after my trip, I found myself drawing parallels between the trees and the challenges companies face in managing distributor and reseller channels.

As channel dimensions grow in size and complexity like the cedars, the old ways of managing partners and programs can’t keep up, dwarfed just like the saplings. That vast difference in scale causes operational and, eventually, strategic problems for businesses.

Back at work, I listen to manufacturers and partners alike, who speak of challenges branching out in many directions:

–Desire for pay-for-performance channels. Many manufacturers lack the insight to know if they’re rewarding partners accurately and fairly for selling the right mix of products.

–Changing incentive strategies. Manufacturers are shifting from traditional incentive programs that beget short-term results to more strategic programs that drive sustained behavioral changes. This places greater market-planning burden on the partner than ever before.

–Compensation for referrals. The traditional role of the partner has been to sell, but that role is changing. With the emergence of the cloud, channel partners have more recommendation influence and want to be compensated accordingly. Manufacturers are wrestling with the fundamental dynamics of how to reward partners who recommend a sale but don’t actually close the deal.

–Difficulty assessing financial impact. Manufacturers tell me time and again: “It’s almost impossible for me to show an ROI on our channel investment. My finance guys think we’re paying our partners too much. I’m sure we’ve overpaid on our MDF and incentive programs; I just don’t know where.”

Lying beneath these challenges are disjointed dimensions of people, partners, products, systems and programs—a snarled mess of tree limbs that are difficult to track and untangle.

In the shadow of the giant tree sits the sapling of channel management. Customers admit that although the business has dramatically changed, they continue using siloed systems; obsolete and aged applications; and complex, spreadsheet-driven processes (even years after the spreadsheet’s original owner has departed). The investment in the solution doesn’t address the magnitude of the problem.

It’s time that channel management professionals (including everyone in sales, marketing, operations and finance who affects channel success) see the forest for the trees and realize the time for channel management transformation is here. In fact, it’s the natural next step in driving greater channel revenue, reducing the cost of indirect sales and driving closer, more productive manufacturer-partner relationships.

Reluctance to Change a Channel Management Strategy

Making a change for the better means first recognizing existing procedures don’t offer optimal performance and don’t identify opportunities for greater profitability. That’s not easy, but even more difficult is finding a starting place for problem solving.

You might turn to IT giants like SAP, Microsoft, Oracle and IBM; when you can’t find a product that addresses your problem head-on, you might assume the road ends there. It doesn’t, but the big vendors aren’t focused on the specific challenges of the channel. If you do go a step further to search for solution providers, you’ll find 1,000 unrecognizable companies with “point solutions” that solve a single problem but can’t scale up to handle the full spectrum of channel management.

With so much confusion about what solutions are even available, it becomes easier to fall back on old habits, even when you know the tools and processes are inadequate. But when you figure out where to start your transformation, the solutions reveal themselves.