Getting The Best Return From Channel Spend

Today’s Conversations

Over the last three to four weeks, many of my client conversations have been focused on ROI from partner incentives: discount and rebates, but particularly marketing development funds (MDF).

One client told me that their primary concern is about getting returns from the discounts and rebates that are paid out as part of the partner program. Do the discounts and rebates drive the right behavior from partners? Does it make a difference to the way they sell, and how much they sell? I’ve had the same ROI discussion but around marketing spend with other clients. Are they spending their marketing development funds in the best way? Are funds offered to the right partners? What ROI should they drive and how can this be measured?

Lastly – and this takes up the most part of the conversations – how can all this be done more easily? The real background story for many of these channel executives is that budgets are under pressure, and channel spend is too easily seen as rich pickings. They need to justify the expense and value to the CFO and to the CSO.

What is Changing?

I took a chance to re-read a paper published around two years ago from Accenture, called “Improving the ROI of Indirect Channel Incentives”. Click here to read the original article.

Accenture say that, “Ten percent of the typical vendor’s channel partner incentive spend is generating insufficient return.”

I would comment that at least one of the channel executives I was talking to would dispute that. They would suggest the actual number is much higher!

All of the executives I talked to would agree that their main concerns are:

• How to show an ROI for the incentive spend, and

• How to reduce the management cost of incentives.

We all know and see the channel delivery models are changing. Cloud, subscription, marketplaces are all coming into play more than they have historically. Channel executives have been able to get away with spend in these new areas without fully justified ROI and measurement. They have been ‘seeding the market’ and investing in the future. These may be new go to market models, but the same fundamentals apply to channel spend.

Vendors should be using their channel budgets to motivate and direct partners that have the best, closest customer intimacy. That way they will get the best return. They might also partition funds for “new partner and new market growth” and this will have a different ROI profile, but core channel incentive spend has to go towards partners with the best opportunity to move the needle on sales.

The legacy channel still remains the major part of channel incentive spend. Scale and effectiveness of operation needs to be applied programmatically here as with cloud. Funding needs to be targeted from insights derived from data and performance, to deliver best ROI with low touch effort. Many vendors still today spend too much time ‘managing the process’ and not enough time on driving value from looking at the return on spend. This means assessing alignment with campaigns, and insights on most (or least) effective partners.

What to do next?

The conclusions we come to are to get more aligned to two areas:

• Measuring spend and ROI

• Align rebate to reward the sales and engagement value delivered by a partner

• Ensure the more a partner invests in you the more rebate he may earn

• Focus more MDF on partners who show local market intimacy

• Reducing process management overhead

• Review processes for overhead, duplication, audit failure and operation ease

• Direct discrete MDF to partners that engage in vendor campaigns

• Link MDF spend to campaign driven activities and outcomes

bChannels have helped clients in this journey many times before. We work with a range of clients to help drive more clear value from their indirect channel incentives and spend.

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