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Leading Practices in Channel & Trade Promotion Programs
CCI WHITE PAPER
Leading Practices in Channel & Trade Promotion Programs Has anyone in your company recently asked one of the following questions? • • • • • • • What is the ROI on our channel programs? What are we getting for our money? How are partners promoting our products? What are the main products being advertised? What kinds of programs are most effective? Do channel partners utilize the programs? Are our programs legally compliant?
In the last few years a shift has taken place in the business communityfrom slashing channel and trade promotion budgets to seeing the channel as a revenue stream worthy of thoughtful investment. In either case there is at least one goal in common: Making the wisest channel investment for the highest possible returns. Knowing how to develop, manage and measure channel and trade promotion programs that will endure changes in the economic and legal landscape and the scrutiny of “investors” can be challenging at times. The purpose of this white paper is to provide channel professionals with leading practices in channel and trade promotion programs that can ride out such challenges now and in the future. Leading Practices We have found that there are several leading practices that are fundamental to developing and managing profitable, compliant and measurable channel and trade promotion programs. Included in this white paper are the following leading practice discussions. 1. Do the Pre-Work 2. Begin with the End in Mind: Establish Objectives 3. Strategy Still Counts The Good, the Bad and the Marginal: Consider the 80/20/80 Rule 4. Tactics, Implementation & Execution Communicate & Educate Gather the Data You Need 5. Your Brand is Only as Strong as its Weakest Link 6. Numbers Don’t Lie: Analyze the Data 7. Compliance is King Do the Pre-Work The adage used in construction applies to business in general: Measure twice, cut once. If one measures twice, it’s less likely that resources will be wasted in the execution of a plan. Measure the market, measure the competition, measure the channel and you will know better how to plan and execute successfully. Some key questions that are worth asking at this stage in the process include: 1. What is going on in the market? 2. How does your program rate versus competitive or like programs? 3. What would it take to make your program more competitive?
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4. What segments comprise your channel, and how sales and marketing savvy are they? Do extensive research. Talk not only to your executive management, but also to people in the field who deal with the competition and end-customers daily. Include the sales organization as well as the partners. Pre-work should also include researching laws,resources and other elements that will impact the decisions made and actions taken with regard to channel program development and management. Your Finance Department or Certified Public Accountant is a source of valuable information such as guidance about whether or not your company accounts for costs as expenses or as revenue reduction and how to reclassify expenses in the case of program exceptions. Begin with the End in Mind: Establish Objectives If you don’t know where you’re going, you’ll never get there. There are many suitable program objectives, but any program objectives should support corporate and channel objectives before all else. Simply by establishing clear and measurable objectives, you are on your way to improved performance. Start with corporate objectives. Are there revenue or other measurable goals that all business units within the corporation are using as a guide? Also, establish measurement criteria upfront; knowing how success will be measured at the onset of a new program allows for data capture points to be built into the process, making it easier to recognize if the program is on target or not. Next, address the channel objectives. These usually include a subset of the corporate objectives such as the amount of revenue that must be attained through the channel, metrics regarding channel recruiting and development or percentage of channel program utilization. Regardless, these objectives will act as the beacon for all subsequent planning, allowing for your company to easily determine whether or not strategies, tactics and results map back to the established goals. Strategy Still Counts Once objectives are established and agreed upon, the next step is to develop a strategy for achieving the objectives. Strategy is often confused with tactics and is a step in the process that can be easily overlooked. We caution companies to make every effort to establish strategies that map back to the objectives and can also be translated into actionable and measurable tactics. According to the American Marketing Association, strategy “provides decisions and direction regarding variables such as the segmentation of the market, identification of the target market, positioning, marketing mix elements, and expenditures.” In the case of channel or trade promotion programs, strategy often involves decisions about partner selection and development, how to tier the channel, identifying the needs and skills of each tier, what types of programs and tools are needed by the channel to help them achieve their portion of the objectives and the budgets for all elements. A strategy that we have seen used with great effectiveness is what we will call the Military Strategy wherein the manufacturer is responsible for the “air cover” and the channel is responsible for “frontline ground work.” In other words, the
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manufacturer generates demand and leads for the channel and creates high-level brand awareness and equity while the channel complements the efforts of the manufacturer by providing marketing and sales support. Not only is this approach effective in achieving most objectives, but it is also a very efficient use of resources and allows for measurement at several levels in the process. The Good, the Bad and the Marginal Consider the 80/20/80 Rule Not all partners are equal. They may have started that way, but the 80-20 rule is alive and well in channel management and programs. In fact it actually should be called the 80/20/80 rule: 80% of your revenue is generated by 20% of your partners, who in turn spend 80% of the accrued Coop/MDF funds. Operationally speaking it may seem that the easiest thing to do is to offer the same program to all of your partners, but if you are thinking that way, STOP. There is no such thing as a good, one-size-fits-all program. The best solution is to have a channel or trade promotion program – even a choice of multiple programs - that permits the participants to plan and execute activities that fit their particular business needs under the control and authority of their manufacturer channel or sales manager. Of course it goes without saying that the program(s) should always map back to the manufacturer’s objective, thus creating a win-win. Truly effective programs can be developed when considering the 80/20/80 rule and by doing a combination of the following: Authorizing and investing in the right mix of channel partners • Skill sets • Business models • Geographical locations/number of offices • Sales and marketing effectiveness Re-assessing channel partners regularly • Training and authorization requirements met • Utilization of channel programs and tools • Revenue and sales volume contribution Tiering and segmenting resellers to meet the corporate objectives Tactics, Implementation & Execution While tactics, implementation and execution may sound like the same thing, they are not. Using these terms interchangeably is a common occurrence, but it is not entirely accurate. For the purposes of this white paper, there is a distinction between these three terms that we will address now. Tactics are a laundry list of activities that support the strategy. For instance, if the strategy is to provide the channel with a mix of programs that will integrate corporate activities with channel activities, then one tactic may be to provide channel partners with an online marketing tool that will allow them to create customized, cobranded marketing materials in a cost-effective and resource-efficient manner. Combined with a co-op program, the online marketing tool will allow partners to complement the corporate marketing efforts and make the best use of every marketing dollar they spend.
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Implementation is the development and subsequent launch of tactics. This might include developing a system to manage the channel programs, testing the systems and subsequently launching them. Execution is putting the tactics into action after they have been launched. Executing well is a concept that most people know and even understand but that few do, mostly because they do not realize that execution is an ongoing process rather than a one-time act. Contrary to popular belief, execution does not end when a channel program launches – it begins. Execution, according to Execution: The Discipline of Getting Things Done (Larry Bossidy and Ram Charan), “is a systematic process of rigorously discussing hows and whats, questioning, tenaciously following through, and ensuring accountability.” We assert that execution is a cyclical process that includes data gathering, communication and education. Communicate & Educate It is virtually impossible for manufacturers or their channel partners to execute well if this process is not followed consistently. One step in the process feeds the other, and they are symbiotic. Learn: By doing research and getting feedback, learning is possible. Knowledge empowers decisions and makes it possible for companies to educate their internal staff and their channel. Educate: Education informs and puts information into context, especially if the information represents change. Education is also a two-way interaction. The Internet has made it more cost effective and easier than ever to keep all participants educated and current on the program. Partners are more likely to recommend products with which they are familiar and that they really understand. Using a portion of your channel funds specifically for partner education is a wise investment. Insure that your partners have easy access to program information and advertising tools. Online tests and rewards can guarantee that everyone, from manufacturer sales reps to channel marketing personnel, knows the details of programs. After all, they are the ones who are in front of the customers regularly and will need this information most often. Get Buy-In: Once informed, people and companies are more likely to buy into the change, strategy, program or idea. Buyin is a critical ingredient for channel program success,however many manufacturers assume that buy-in is the same as agreement. Channel partners may agree to a contract or they may utilize a program, but if they are not fully sold on the value, they have not bought in and their real commitment to success has been compromised. Communicate: Communication must be consistent and must take place regularly. Communication reinforces buy-in and trust, and it fosters an environment that allows for the free exchange of feedback, information and ideas. Feedback: Honest feedback is critical to learning and to the process of making informed business decisions. Without trust and communication, however, feedback will be marginal and skewed. Gather the Data You Need When it comes to gathering and analyzing data, there are many methods that may be utilized. Spreadsheets work but they are far from today’s leading practices,
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in part because they were not designed for real-time data capture and analysis, but mostly because they lack the essential components of internal controls as mandated by the Sarbanes-Oxley Act. CCI offers web-based solutions that enable the process of managing channel and trade promotion programs. To get the best performance from programs, companies need to gather and analyze data that empowers them to make good decisions. The data may include information such as: • • • Which regions are performing better than others? What are the variables that make their performance better than in other regions? Which partners have money available versus which are using the money provided?
Having measurable goals, supported by easy-to-use tools that capture and report real-time information on the program, is critical to meeting objectives. The Internet is the most effective way to get this information in the hands of the people who need it and the best way to manage compliant, measurable programs in the longterm. Your Brand Is Only as Strong as Its Weakest Link If all or part of your corporate objective is to advertise the company’s products or services, branding is a huge consideration. The channel plays an important part in the company’s brand identity: they advertise, comarket and sell on behalf of your company every day. In most cases they represent the first and last impression made on the end-customer, so providing them with the tools and skills necessary to extend your brand and your reach is another important investment, especially if any of your programs require submission of partner-developed marketing materials for approval before they can be released or funded with co-marketing or other manufacturer-provided funds. Many manufacturers provide the channel with imagery, copy and other elements to create their own, custom marketing materials. These elements are often delivered via an online partner portal, CD’s or even in the form of manufacturer-created templates that are already printed and ready for use. There are inherent challenges with each of these methods of delivery including limitations such as costs, time of delivery and the partners’ inability to fully co-brand the materials. An online content management and ad creation solution (i.e., CCI’s AdPro™ Module) empowers manufacturers as well as their sales and marketing channels to effectively co-brand and market products and services by allowing manufacturers to specify brand assets, usage, content, and customization parameters. AdPro also makes it possible forchannel partners and other authorized users to apply their own identity to a marketing template so that both companies may protect their brands and the marketing message remains consistent. Moreover, AdPro is easy to use and maintain which makes it a favorite of channel partners and manufacturers alike.
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Numbers Don’t Lie: Analyze the Data The proof is in the proverbial pudding, and it’s at this point when you will have a real appreciation for all of the previous leading practices and ideas that you put into action: 1. Doing the pre-work 2. Establishing measurable objectives 3. Structuring your program(s) with the 80/20/80 rule in mind 4. Educating, thoroughly training and communicating 5. Setting up simple ways to gather and analyze information 6. Implementing internal controls and a system to manage your programs 7. Executing well 8. Providing tools and gathering meaningful data Now it is time to measure how the program has done against the objectives, what returns have been achieved against the investment (ROI) and make any necessary adjustments to keep the program moving in the right direction: towards the established and measurable objectives. The first step is to aggregate the data that you have been collecting all along and put it into a format so that the data reflects meaningful information. The better channel and trade promotion solutions should capture this data For you automatically, based on your company’s business rules, objectives and the data points that were established together. Then, the data will need to be analyzed to determine if and how the program is on track. We recommend that clients go through a quarterly review of their program data with our assistance, to determine where their program resides versus where is should be at a given point in the fiscal year. For instance, if one of your channel objectives was to get your channel partners to utilize at least 40% of their accrued co-op funds, the data should easily tell you if that has occurred or not. Regardless of what the analyzed data reveals, there are numerous ways to put the data into action. If utilization is lower than expected, for example, it should be fairly simple to garner feedback from the partners to determine why they aren’t taking advantage of the co-op funds and make changes to the program or system to increase their usage. In the case of a program that is ahead of projected results, it can be equally useful to use the data to determine why the program has been so successful to that point and put measures in place so that the program and system continues to reap the desired results. Without having all of the essential elements in place first, however, it will be challenging to compile and analyze data to give you an accurate assessment of your program and program management system. Compliance is King The bottom line is that legal compliance is the pervasive and ruling force in business today. Therefore, we would be remiss if we did notcomment on compliance with the Sarbanes-Oxley Act (SOX) and the Financial Accounting Standards Board Ruling 019 (FASB). Channel and trade promotion programs are inherently financial in nature and must conform to and comply with all laws. While the scope of compliance reaches well beyond a channel organization and into the complete enterprise, channel
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professionals do have the ability to create compliant and effective programs; the two are not mutually exclusive. Remember the holy trinity of compliance – separation of roles, maintenance of records and correct classification of costs – and your channel and trade promotion programs will likely fare well. Automating programs in a system that allows for the necessary internal controls and compliance standards is an excellent step towards managing compliant programs. But the programs must first be developed. Empowering oneself with information is the best first step in developing a successful set of channel programs that will achieve corporate objectives, so begin with the end in mind and follow today’s leading practices and your programs, too, will be king. In Conclusion Manufacturers with successful and compliant channel and trade promotion programs follow these leading practices and use their programs to extend the marketing and sales strategies to the channel, while monitoring results and making changes quickly. Manufacturers that are still managing spreadsheet-based programs have likely given up on the concept that their co-op or MDF programs could become acompetitive weapon, and they are in danger of being non-compliant with SOX and FASB. Automated channel programs are more than just another way to do business. They are the leading practice in channel and trade promotion program management. CCI is the only company with over 20 years of hands-on channel and trade promotion experience in a software-as-a-service model. CCI’s professional services and proprietary software, combined with a vast array of experience, enhances communication and increases the return on investment (ROI) and measurability of sales and marketing programs for companies that sell through direct and indirect channels. When working with CCI, companies are able to communicate more clearly with internal and external sales and marketing channels, for mutual success. To learn more, please visit www.channelmanagement.com, call 888-260-2667.