Measuring Channel Performance

As channel consultants we are often asked to research and review the performance of a channel program, or group of partners, to help a vendor get greater insight into what is happening. What we often find is that the vendor’s perception of what is going on in the channel (versus the partner’s perception) are poles apart.

What causes this discrepancy? Why would a vendor not know what is going on with their partners or their market? The answer is usually related to the fact that their channel measurement systems are evaluating entirely different metrics to determine performance.

The second point about channel measurement systems is that, while the channel is of course important, it is in fact a mechanism to get the product or service to the end customer. Channel measurement systems will only be truly effective if what you are measuring has an overall impact on improving the customer experience, while still being aligned to the corporate goals. In other words, it is no point priding yourself on (say) a sharp increase in partner revenue if your partners are selling the “wrong” product to the customer – eventually customer satisfaction will decrease and customers will defect to your competitors.

So how do you use a Channel Measurement system to really improve channel performance?

Common measurement mistakes

The most common mistakes of Channel Measurement systems are that they are internally focussed on the business silos, rather than being focused on the customer experience.

For example, organisations may measure how long it takes to process a request through a department, but may not necessarily measure the time from when the customer actually lodged the request (which may have been a week ago but it was held up in another department).

Similarly, organisations may measure so many metrics (that are important to different people within the management team, for whatever reason) that the volume of data becomes overwhelming and ceases to be relevant to the customer experience.

So what is the measurement solution?

The answer begins with 3 simple questions – “What?”, “Why?” and “How?”

1. What do you want to measure?

The first rule of thumb is to look at the overall channel strategy and related end to end processes you are trying to achieve. One of the core Channel Dynamics models is our Dynamic DSITM model, which states that first we must Define who the customer is, then we Select the appropriate partners that can service these customers, then we Implement the appropriate programs to support the partners and customers. Consequently, your channel strategy is a reflection of your corporate strategy, and they should be aligned.

Similarly, the measurement system should focus on the key channel and business processes, not departmental functions that will drive these strategies. For instance if a market has been identified and targeted for a new product range, then what type and how many of partners will you require to service that market successfully? Are these basic skills within your existing partner set and so will just require re-training, or do you require new partners to be recruited?

Alignment is the catch cry. Unless your entire channel program and tactics are aligned with your corporate strategies and supported with the appropriate resources, then channel success will prove fleeting or extremely difficult to achieve. Therefore the metrics chosen must be relevant to multiple departments and they will need to understand how their efforts will result in achievement of the channel and corporate goal. For vendors that are working in a 2-tier distribution model, the distributor and reseller processes also need to be factored in.

As a rule of thumb I have always found that to get the best from my teams or partners, there should be only a few (between 3-5) really clear objectives with unambiguous measurement criteria. Not really understanding the desired partner actions or customer experience, or too narrow a focus, can run the risk of the falling into the previous traps, and too many just gets too hard to be consistent.

Needless to say this is not easy! I find the easiest way to start is first to think about the “outcome” you want, and then work out how do I measure it, rather than start with a myriad of potential unaligned micro metrics. Often you will find that you will only need a very few overlapping metrics to ensure you don’t end up with problems outlined earlier.

2. Why are you going to measure it?

Why are you taking the time to measure each metric? Will the results alter the way you behave? If you improve a metric, will it increase both revenue and the customer experience?

If a metric will not affect the way you do business, then maybe it’s not worth monitoring. It is quite common for us to find organisations measuring irrelevant departmental functions that do not align with achieving the overall channel or customer goals, but have become part of the culture as they measured for so long that they continue to be measured (even though they go straight into a filing system without any assessment or action).

There will often be internal or external pressures to measure things that are not relevant, not important to the overall process (but may make an individual or department look good), or the information required is not easily available. Without a clear “Why?”, people will continue to measure what’s easy rather than what’s important.

3. How are you going to measure it?

Once you know “What?” and “Why?” you want to measure something, then you can work out “How?” you can collect the relevant data to be able to support the overall objective.

This is a reality check. If it gets too hard, people that will complain that they don’t have the time, systems or ability to collect the required data. As mentioned earlier it is then about taking the time to analyse the data and against the key metrics you have chosen and understand what the data is telling you. One month does not make a trend so it is important to look at the data so you can compare previous periods, different partners, regions, product sets or what ever is relevant, by looking at the trends that are occurring across all the metrics before acting too hastily.

I don’t believe there is ever a perfect system, or if there is it is only momentary, because business needs are constantly changing. Therefore what you want to measure will need to be reviewed or updated as your corporate or channel strategy evolves. However ensure that any metric changes does not render all the historical data irrelevant, thereby making trend analysis very difficult, but also you don’t want to end up with measurement “creep” again.

Implementing a Channel Measurement System

Implementation is about making it happen (otherwise you might as well not waste time and energy on measuring anything and go back to “gut feel”).

The whole point of measurement systems is being prepared to act and make changes based on the analysis of the data collected. If you don’t have the supporting change management culture in place, then implementing any of the adjustments in product, service or support process required to achieve your corporate and channel goals will either be impossible, wasted or extremely hard work.

Channel Dynamics has an earlier white paper “Action Plan Guide” that can assist with the detail of this process. However the highlights of this process are:

    1. Define your goal
    2. Check this goal aligns with your strategy
    3. Identify the obstacles that may prevent you attaining the goal
    4. Set appropriate tasks and deadlines
    5. Determine the resources required to achieve these deadlines
    6. Establish Accountability & measurement of the plan (it never ends!)

Our final advice around channel measurement systems is that while it’s easy to measure simple metrics such as revenue, this is a blunt instrument that is in fact measuring a past outcome of activities. Focus on a broader range of metrics that can provide further insight into the channel, such as expense, profitability and productivity. Where possible use activity based KPI’s that will lead to the desired outcome (eg. the number of partner trained), as well as the “harder” metrics of revenue per partner, number of active partners, lead to close ratio, cost per partner, etc

Channel Measurement Systems are not a standalone function that resides solely with the Channel Account Managers. They are part of the framework of your complete go to market model, and should span across entire the business, not just departmental silos or focus on isolated partner metrics.