New Ways to Solve Channel Management ComplexitiesBy Guest Author | Print
COMMENTARY: We take a look at why your spreadsheet can't solve modern channel management complexities.
One Branch at a Time
Implementing a channel management solution means climbing one branch at a time.
It seems counterintuitive, but taking a holistic, big-bang approach to transform your channel management isn't typically the best place to start.
Before you try tackling the entire tree, start with a branch. Pick one process—let's say North American Rebates, for example—and focus on that. You've narrowed your geography and narrowed your program; you could even further narrow to just your top partner tier. Now focus on understanding and validating everything related to those partners and that process.
Taking a focused approach gives your project scope. It also lays a foundation for making changes and investing accordingly. Once you've obtained meaningful insights (e.g., 38 percent of those rebate payments were unnecessary), you can expand the project to more partners, more geographies or other types of channel incentives.
Scaling up your sapling will help untangle the complexity of the giant tree.
Once you have a significant amount of analytical data from your first project, you're ready to expand. How do you define "significant"? It depends on the size of your business.
Going back to the North American Rebates example, let's say you've been tracking and validating rebate claims for the last eight weeks. You've found that 19 percent of submittals come in without proof of execution and 22 percent are duplicates—which means you're paying an average of $300,000 per quarter.
That number will serve as a baseline against which you can measure and estimate the overall impact to your channel business. At this point, you're well-positioned to expand your program.
There are four ways to build out a channel management strategy: lines of business (laptops, printers, etc.); geographies; partners or partner tiers; and channel transactions (marketing development funds, or MDFs, rebates, incentives, special pricing, charge-backs, etc.).
Don't go for all four categories at once. Build at your own pace. You want a road map to get from point A to point B without boiling the ocean but without taking 10 years. Success is about reaching a milestone, not an end goal. The milestone is where you're able to share empirical results and deliver new insight to the business.
Growing Profits Means Increasing Channel Management Investment
As technology evolves and more commerce options emerge, transforming channel management methods to accommodate changing business complexities will become even more imperative.
What happens if you stick with the same old spreadsheets? Nothing immediate or dramatic, but over time, your business could experience "death by 1,000 cuts": Your partner who used to carry seven of your products now carries only three. Your low-touch sales model now requires your involvement in almost every deal. Your earnings report, income tax depreciation and amortization (EBITDA) drops from 23 points to 9.5. Your business slowly becomes less profitable and eventually spirals downward.
In most industries, especially advanced tech and manufacturing, shrinking profit margins mean less margin for error. That calls for change. As striking as the canopy overhead may be, they say the view is better from the top. Now, you just have to implement the solution that will take your channel management practices to the next level.
Michael Kerman is vice president of business management at Revitas, which provides integrated solutions for contract, revenue and compliance management.