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May 16, 2020

Key Decision: Investments in Channel Management Tools and Models

It is too easy to forget that channel management is really all about economics. And that means it’s really all about building and managing an investment model. Make sure you can answer three critical questions.

Why should I invest here instead of there?

Weigh your opportunities as part of a portfolio of investments rather than just as an isolated investment. You can build a great business case for why you need more partner training. You can probably even demonstrate how the extra investment will be returned with increased sales. But that isn’t the central question.

Are the dollars you are spending here going to yield a better return than dollars spent over there? When you have the dollars to invest, it is about opportunity costs.

Make sure you have a strongly capable model for running pilots, isolating investment variables and measuring success. Run every major investment through this model. Not just to get the kinks out of the operational requirements, but to quantify the return on investment and benchmark success verses other investments.

How does my investment change my costs-to-serve?

Ability to scale is the speed governor for channel programs. Almost every partner performs better with an account manager but you simply can’t afford to give one to every partner.

Model your cost to serve as part of every investment decision. Does the suggested investment reshape you tiering structure? Are you maintaining or exceeding your general ROI level guidelines? Do you need to disinvest from another area to keep your costs to serve balanced as you ramp up the new investment? All of these questions are easily addressed with the right cost-to-serve model and should inform your investment decisions.

Will my investment drive partners behavior?

On paper, the investment idea may look sound. You won’t change partner behavior if partners are not using, or see little value in, the investment area.

Categorizing your investment impacts in terms of partner usage (or awareness) and perceived value lets you build an investment value model. Working off of the famous BCG four-quadrant model:

  • Cash Cows are benefits partners use and attribute value to
  • Rising Stars have high perceived value but low awareness or usage
  • Dogs have low usage and low perceived value.
  • Question Marks have high usage but low perceived value. (The question – why do people use it if the value is low?)

Fuel investment in rising stars and cash cows by killing dogs and most question marks.

The key– build an investment model

George Box wrote that "essentially, all models are wrong, but some are useful" in his groundbreaking book on predictive statistics. Build an investment model that lets you weigh one investment area verses another, maintain the right cost-to-serve balance and measure investment impact.

Only then can your investment decisions be data driven. And when your decisions are data driven, getting senior executives to understand your funding requests relies less on persuasion and more on common sense.

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Richard Flynn

Richard Flynn is a recognized leader in channels and go-to-market business strategy and execution. A Founding Partner and Chief Marketing Officer for The Spur Group, Richard has over 25 years of go-to-market experience in sales transformation, channel management, and customer marketing.