You do have a channel partner scorecard, don’t you? If not, you should. Why? Because your competition no doubt has one and is using it to make more money in the channel.
If you already have a scorecard, is it doing everything you need it to? Here are some ideas that could lead to improving your score carding process.
Why Use a Scorecard?
The basic function of a channel partner scorecard is to profile your channel partners.
Profile information can range from the simple to the complex. The basics might include name, location, key personnel, geographic coverage and length of the relationship. More detailed information might include percent coverage of the addressable market, technical know-how, marketing plans, customer service reputation, and administrative support. What goes into your profile will depend on the nature of your particular business and channel relationships.
There’s a caveat, however.
Don’t leave gathering and submitting profile data up to your channel partners. This is one area where manufacturers and vendors need to be proactive. Your channel partners have little incentive to gather and submit the information you need. They are too busy running their own businesses.
Instead, set up your own system for gathering this information, or use a third-party that can gather the data, cleanse it, ensure its accuracy, and enhance it to meet your requirements.
Setting Performance Metrics
Once you have a solid foundation of profile data for your channel partner scorecard, you can begin to apply some performance metrics and score your channel partners accordingly.
One of the basic performance metrics is revenue. Which partners are generating the most revenue for your company? And, for which products?
As a lagging indicator, revenue doesn’t paint a complete picture. In fact, it could indicate a channel partner that is selling on price and pulling demand away from other channel partners who are performing the valuable work of developing business.
That’s why a good scorecard should also include some leading indicators, such as deal registrations. Channel partners who are registering deals or sales opportunities, are generating demand for your products or services. These partners might be your future star performers.
Another leading indicator could be utilization of incentive monies, such as Market Development Funds (MDFs). As the name implies, MDFs are designed to encourage the generation of new business. Which channel partners are taking full advantage of the MDFs allocated to them? Measuring the rate of utilization of these funds by partner on a quarterly basis can help you separate the laggards from the star performers.
Metrics brings us to another key advantage of score carding: tiering partners.
Once you set up the metrics that are most important to your business, you can score your channel partners into tiers, such as gold, silver, and bronze.
Top performers are channel partners that offer the most potential to drive your business forward, now and in the future. They should be compensated accordingly and given the greatest incentives to keep up their performance.
Lower level performers should be offered incentives to move them to a higher tier. If their performance declines, you can eliminate and replace them.
Tiering your channel partners helps ensure peak operating proficiency, which drives revenue and profit.
Evaluate Your Score Carding Process
Channel partner score carding is rapidly gaining acceptance as a “best practice” in Channel Data Management. As with any practice, it can be done well, or poorly. But it can’t be done well without clean, accurate and standardized data as a solid foundation. If you would like to review what that means, see our eBook on channel data collection practices.
Closely linked to score carding is the practice of establishing Key Performance Indicators (KPIs). Stay tuned as we explore this subject in greater detail in future posts.