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In order for a map to be useful, you need to know both where you’re going and where you are. At A first step to creating the advisory equivalent of a map is surveying where b-to-b organizations are today and defining options for the road ahead.
Our 2008 SiriusDecisions Channel Survey is such an effort. We invited clients and selected other organizations that rely on indirect channels – in whole or in part – to describe the current state of their channel efforts. In this article, we share some of our findings from the baseline studies, as well as our strategic observations regarding what roads to choose based upon where most organizations stand today.
Nearly 50 b-to-b organizations that sell complex, enterprise products and services participated in the survey; markets represented include software (52 per cent), hardware and telecommunications (27 per cent), information services (7 per cent), financial services and healthcare (2 per cent each). By revenue size, 23 per cent were between $1 billion and $5 billion, 14 percent were greater than $5 billion, 14 per cent were between $500 million and $1 billion and the remainder under $500 million. All responding companies currently work with more than one type of channel partner, while half rely on channels for more than 50 per cent of their revenues.
We collected data in the following areas:
* Role of channels in the revenue mix. We rated the channel function as the second most critical in marketing and predicted its importance would only grow. The results of this study certainly support our prediction: 71 per cent of respondents reported they are getting a larger share of their revenue from channel partners than they did 12 months ago. Nearly 32 per cent said this share has increased more than 10 per cent.
* Channel program spend. Half of respondents reported that their organization spends less than 5 per cent of revenues on channel enablement (management, marketing, selection and general support). Another 22 per cent indicated spend between 5 per cent and 10 per cent of revenues, with the remainder between 10 per cent and 25 per cent. Corresponding to the fact that companies rely more on channels for revenue, 20 per cent of respondents said their organization’s channel spend has gone up more than 10 per cent in the last year, and another 48 per cent said it has increased from 1 per cent to 10 per cent.
* Channel support. Of the organizations surveyed, 91 per cent support their partners through enablement (e.g. tools, collateral), while 82 per cent do so through raining/knowledge transfer. Only 68 per cent provide demand generation/leads, and 45 per cent provide reputation-based air cover (e.g. awareness).
* Funding method/determination. Our survey indicates that b-to-b organizations are most commonly providing funds to partners through co-op (60 per cent) and market development (50 per cent) methods. In terms of when funding is determined, 35 per cent of respondents reported they allocate funds on an ad hoc/request basis; 25 per cent allocate annually and by accrual, respectively (the remainder use other methods). Factors that determine how much a partner gets include amount of revenue currently contributed (46 percent), partner tier/level (41 per cent), whether a marketing plan has been submitted (37 percent), goal attainment (32 per cent) and partner growth rate (18 per cent). Most interesting was the fact that 23 per cent reported they use no method to determine funding levels.
* Channel reporting. How do channel partners report their performance? Respondents most frequently cited deal status/pipeline reporting (51 per cent) followed by deal registration (42 per cent), results/leads/performance generated by a partner-created program (35 per cent) and lead acceptance (35 per cent). Most interesting is that 15 per cent said their organizations require no reporting at all from partners.
* Technology investment. Improvements in technology are certainly a priority of our study participants; more than 75 per cent indicated their organizations plan to invest in incremental channel technology over the next 12 months. Technologies in use now span a wide range, from homegrown to specialized channel software to CRM (packaged and hosted); more than 85 per cent of companies administer channel programs themselves, and more than half adjust their programs based on geography.
* Top goals and challenges for channel functions. When asked to tell us their top three goals for the channel program, the trend toward greater reliance on channels is supported by the fact that growth was by far the top choice, and in particular, expanding the number of partners in existing markets or (to a lesser extent) in new markets. Other goals included helping partners accelerate their sales cycles, improve sales alignment/reduce channel conflict, improve communications, focus support for strategic partners and reduce cost. In terms of top challenges, the lack of tracking and automation was the most frequently cited followed by gaining new partners, establishing rules of engagement, focus, gaining mindshare and targeting.
In our survey, the overwhelming majority of respondents rated their channel function’s performance as fair or good, indicating a clear need for improvement. Just a few roads will dramatically improve results; here are two that can help build performance excellence:
* Align spending with growth. Supporting more partners or helping the ones you have win more business will require a bigger investment, unless your organization can drive a great deal of leverage. Our study clearly pointed out that companies are depending more on channels, but the overall spend does not appear to keep pace with the value channels are expected to deliver. The SiriusDecisions budget database supports this finding: Over the last five years, organizations report that they invest a disproportionately lower percentage of budget both for programs and personnel to support channels relative to the value delivered by those partners. If you believe your channel marketing efforts are effective for the current volume of revenue, take a look at what that breaks down to based on a dollar invested in channel marketing and its corresponding yield in channel revenue. If you want to add revenue, this is a basic benchmark for how much channel marketing investment is needed.
* Improve reporting. The disconnect between spend and value delivered leads to the question of how much better channel results would be if more was known about the use of the current investment. How effectively can marketing allocate budget and headcount without knowing specifics about their use? Visibility and accountability throughout the demand creation process, not just its output, are necessary to defend budget and program effectiveness. It’s hard to predict the impact of incremental spend, or where efficiencies can be gained to make money go further. Channel partners suffer, too, because they struggle to defend funding requests, or because they don’t know how to optimize budget they have. Developing a closed loop around your marketing spend must be at the top of the list for channel marketing functions.
Channel partners continue to gain importance as an effective way to expand into new markets and grow cost-effectively, but cost-effective does not mean free. Right now, we see the greatest impediment to funding the channel properly as a lack of insight; organizations can’t fix something that they can’t prove is happening. Knowledge can be used to define program, information and technology needs that will make growth more predictable and sustainable, as well as leverage resources for program expansion; it will also allow partner performance evaluation on dimensions that are diagnostic, rather than historic as revenue is.
About the Author:
SiriusDecisions, a leading source for business-to-business sales and marketing best-practice research and data. SiriusDecisions Executive Advisory Services, Consulting Services, Benchmark Assessment Services, Learning and Events provide senior-level executives with the sales and marketing operational intelligence required to maximize top line growth and performance.
©Sirius Decisions, 2008. Reproduced with permission.
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