2007 Autumn

Partner Scorecards: Evaluating Channel Effectiveness PART 1 As we head into another new year, it seems one of the new “Buzzwords” being discussed among clients and the industry in general is “scorecards”. Interestingly, the use of the term as it relates to vendor and channel communities means different things depending on the industry.

For most packaged goods (food and drug) and other consumer good manufacturers, the use of the term often refers to vendor scorecards. Specifically, how the retailer scores the vendor across a number of attributes, including; delivery and stocking policies, marketing programs, and other metrics related to category profitability. It is then up to each vendor to plan a solution that will improve their failing areas or they will risk being de-listed from the retailer’s merchandising assortment.

Alternatively, for most business-to-business marketers, a partner scorecard refers to the vendor’s evaluation of an individual partner or reseller as a means to gauge profitability and growth potential. These Partner Scorecards are the primary subject of this article— and a focus at CCI.

For the 23-years of CCI’s existence, vendors have been seeking a way to

measure the profitability and true potential of their channel partners. Our own anecdotal data, as well as more formal research conducted by other parties, indicates that the inability to secure meaningful, actionable insight about partner and program activity is the #1 issue among strategic sales and channel managers. Like the old adage: “I know that half of my advertising is going to waste, I just don’t know which half.” Channel managers continue to launch new channel programs to a more diverse channel organization with little insight as to what’s working

and why. This is particularly frustrating as product life cycles, customer needs, and channel business models are changing more rapidly than ever before. Essentially, this enhances the need for accurate, real-time insights. After all, doubling sales volume vs YAG is really no accomplishment if the cost to do so consumes all the contribution margin and ties up your resources. But how do you know???

In the past, factors that have limited the ability to develop valid metrics have included one or more of the following:

• The inability to effectively measure sell-through volume, particularly in a multi-tiered, multi-distributor channel model.

• The inability to correlate marketing program participation to incremental sales gains (and more importantly the direct and indirect cost of those marketing programs).

• Disparate systems and processes that can’t really provide roll-up reporting across a number of dimensions—because they were really never designed to do so.

Well, we are at the dawn of a whole new era. The technology and acumen are now available to vendors of all types to capture key insight about their channel partners, and individual channel programs. Armed with this insight, vendors can achieve greater channel optimization through improved program efficiency, partner effectiveness, and faster speed to market (or at least improved reaction time).

Through CCI and other companies, the technology exists to capture POS data,

Continued on Page 4

The technology and acumen are now available to vendors of all types to capture key insight about their channel partners, and individual channel programs.

InSIGhTSChannel Management

CCI provides software and services to help marketers manage, measure, and optimize sales channel performance.

02 Business

The answer turns out to be “a lot” if you are responsible for global program fund management. For instance, in the real-

world example shown in TABLE A, which date or action would a manufacturer use as a basis for reimbursement of the approved activity?

We call this example the partner centric model. And, in this example, the reseller

(or retailer) gets all the money he/she expected, but the manufacturer absorbs all the risk of the resulting currency

fluctuation. If they were to reimburse for activities based on the latest exchange rate, they actually pay $680 more for the activity than they otherwise would at the time the actual prior approval was submitted. This fluctuation would not be

a big deal if the USD was indeed growing stronger. however, in today’s declining U.S. market this fluctuation will have the finance people screaming that marketing department went over budget relative to the original commitment of $10,000. (We know, we get the phone calls.) The $680 difference between January and May in TABLE A may not seem like much, but when you are dealing with $ Millions, the impact can influence earnings per share.

Want to keep the finance people happy? Well, then try the approach in TABLE B

We call this table (b) the base centric currency model. In it, the finance people get off the marketing department’s back because the local currency value is adjusted against a constant USD. however, in doing so, the result is a universe of unhappy channel partners who are complaining they haven’t received their just due as initially approved.

Truly decentralized programs don’t experience these problems at the partner level because the programs are funded, administered, and paid in

IIf you have been listening to the financial news or traveling abroad, you know that

the exchange rates between the US Dollar (USD$) and most other currencies have not

been in our favor. The value of the dollar has been dropping faster than Mr. newton’s

apple. For instance, at the turn of the new millennium the Euro (€) was valued at a mere 86

cents. As of this writing, each Euro costs in excess of $1.46 to purchase, and most experts

expect it to push $1.60 in the not-too-distant future. If so, the once mighty dollar will have

experienced nearly a 50% slide in a 7 year span.

What’s the impact on these fluctuating rates for channel marketers?

Bridging the Exchange Rate Gap for Global Channel Program Payments

Time Period Action Cost $ Cost €

January 2007 Completed Prior Approval 10,000 7800

March 2007 Complete activity 10,450 7800

April 2007 Submit claim 10,554 7800

May 2007 Approve for Reimbursement 10,680 7800

TAB

LE

A

Time Period Action Cost $ Cost €

January 2007 Completed Prior Approval 10,000 7800

March 2007 Complete activity 10,000 7500

April 2007 Submit claim 10,000 7450

May 2007 Approve for Reimbursement 10,000 7350

TAB

LE

B

03What’s new

local currency—with no need to “roll up” accounting to a central currency.

For the rest of us, the good news is that there is a variety of ways to mitigate currency risk and contribute to a true “win/win” scenario for your financial people and your channel partners.

For all international programs funded with USD, the simplest –and most accurate way of assuring congruity between currencies is to buy the foreign currencies simultaneously with the allocation of monies to your channel partners. This way, you know exactly how much your allocation is worth at the time of approval. however, this requires that you pre-fund accruals, effectively tying up monies your financial wizards would otherwise have plans for.

A second method involves a futures contract with your bank and/or program administrators to guarantee exchange rates for a specified period of time. In this scenario, it is the banks who absorb the risk by locking-in exchange rates without the pre-funding burden.

Lastly, daily reconciliation of exchange rates can keep the reporting of accruals and balances accurate in the base currency while keeping claims and payments accurate in the partner’s currency. Balances need to be calculated using daily exchange rates to allow for rate fluctuations. Using this approach, the fluctuations still occur but surprises are minimized because reporting is generally more accurate for partners and financial managers alike.

Relative pros and cons aside, represented above are 5 distinct methods of financial accounting for global channel programs. Often, the initial choice was made because of accounting mandates rather than channel marketing best-practices. With the currency fluctuations we are experiencing today, it might be best to re-evaluate your program financials. You may find that an alternative approach is preferred in today’s economy, as well as for maintaining a “win/win” relationship with your channel partners.

You may have noticed a new title for the newsletter. Even more profound is the new

face authoring this regular column. What’s going on? Well, a lot really.

Back in 1983 when we first started as Co-Op Communications Incorporated we

specialized in offering administration of Co-Op, MDF, and other channel incentive

programs. The nature of channel programs has evolved, and there is an expanding

array of program types required to effectively manage your sales channels. We

understand the importance of managing all your channel programs in one tool for the

convenience of a centralized resource. More importantly, however, we understand that

effective channel marketing requires measuring partner performance and acumen

for all your channel programs. To that end, CCI is proud to introduce an expanded

solution set to help manage, measure, and optimize the array of programs required

by effective channel marketers. We’re proud of our ability to offer complete channel

management--and indeed-- complete channel insight. This expanded solutions set

covers the full spectrum of channel marketing programs, including:

Delivering channel insight begins with the ability to deliver meaningful metrics

about your sales channel performance by capturing sales, promotion, and program

data across a number of touch-points. The information captured from all the above

activities can be combined with your POS sales data to create partner and program

scorecards. The result is that channel managers will now have the ability to conduct

quantitative analysis on partner and program performance.

It takes more than software to deliver channel insight and make informed business

decisions. So we extend our Professional Services to help clients design programs

using our vast experience and library of best practices, and analytic capabilities to

help track program performance against goals.

And finally, the astute will also notice a different head shot above—that’s me: the new

Vice President of Sales & Marketing. I’m very excited to be in this role at CCI. My

relationship with CCI started about 10-years ago when I was General Manager of J.

Brown/LMC Group, a $250MM division of Grey Advertising Worldwide that specialized

in Channel Marketing for clients in a variety of industries. I have been involved in

the development of channel programs since 1985—just as channel marketing started

being recognized as the specialized field it has become today. Through the years, I

have had a long-standing partnership with CCI. Finally, one year ago I was persuaded

to come on board because the potential “fit” was obvious to all parties then… and

indeed it is now.

The Channel Champion:Craig DeWolfVP Sales & Marketing for CCI

• Co-op/MDF

• SPIF/Rebate

• Stretch Goal Rewards

• Trade-in Programs

• Lead Management

• Deal Registration

• Referral Management

• Special Price Requests

• Contract/Renewal

Management

• Creative Manager/

AdBuilder

• Partner Profile

Manager

• Partner Business

Planner

• Partner Scorecards/

Report Manager

IncentiveManagement

Opportunity Management

Partner Marketing

Partner Management

04 Scorecards continued

Continued from Front Page

correlate program participation with its sales impact, capture channel profile characteristics (both reported and behavioral) and provide a single conduit to manage and track multiple programs with cross-functional reporting.

Indeed the pendulum has swung—in fact, the industry is in danger of collecting too much information(!) It is now possible to track sales contribution not just at the reseller company level, but the individual sales rep level. This includes effective sales volume, close ratios, length of the sales cycle, new vs. existing clients sales, new technology penetration, special skills and certifications, and much-much more.

I know what you’re thinking: “We’ve finally reached the holy grail of channel optimization. When can I start?”

Whoa there, Trigger. The real key to

channel optimization lies not in the breadth of information you can capture, but the understanding of which leading indicators make sense for you in making the right business decisions. It is our experience that these indicators for program and partner performance can be vastly different depending on the type of product you sell, and your channel make-up. For instance, commodity products with short sales cycles are going to require different performance metrics than expensive leading-edge technology products with long sales cycles—particularly if the latter requires special channel skills and/or certification.

Future articles on Partner Scorecards will focus on the considerations that will help you decide which metrics are right for your organization. We will also cover the source of that information. We do hope you stay tuned.

7250 Redwood BlvdSuite 105novato CA 94945

Autumn Edition 2007

For more information, visit us at www.channelmanagement.com

InSIGhTSChannel Management

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