by Martin McNally
Director of Product Management, CCI

Like any business initiative, channel incentive programs must be measurable to determine their impact and value to an organization. Data is power, provided that it is explainable and actionable. ROI's are critical success factors and you have to measure them before you can use them. Given the complexity of incentive programs, what attributes are most critical to measure to track program success? Regardless of measurements you use and the weight you put on each one, it's essential to understand that each measurement is likely influenced by another.
We gather metrics at a variety of levels to gain ROI insight. We must map them to one another to garner the best intelligence - tactical to business, business to program, and many relevant permutations among and within the chain.

As discrete as a single measurement may be, it is not an island. There is a ripple effect. Just as a sales transaction is the result of multiple activities performed by a channel partner, so too is attainment of another business outcome - ROI. One metric, with its own ROI, feeds another metric and influences that ROI too. You must anticipate and manage these relationships to make best use of your collective ROI.

Once you have defined your ROI metrics and measured their results, piecing them together is the next step. Tactical metrics are tied to individual marketing activities conducted by channel partner. Such as: How many opened your email campaign? How many attended an event? How many resulting demos were scheduled? Business metrics are separate from tactical measurements, though both are equally reliant on the same activities. As a separate measurement, a business metric is made possible via the aggregation of multiple activities. Aggregate and analyze tactical metrics to identify, for example, product line or business-level achievement such as new customer count or revenue growth. Then, take the next step to determine how all these indicators enabled you to meet your program goals.

ROI should be defined and measured at multiple levels - across your program lifecycle and among its many moving parts. If one metric is not generating the desired results, or more fundamentally is hard to measure, look underneath it or alongside it to determine if other dials can be adjusted too.

What struck me in this survey were the repetitive comments on the impact of channel program ROI. From measurement to trends to best practices, the ROI dynamic appeared multiple times as a response. Here are some of the pertinent survey questions:

Q. How do you measure the success of your MDF/co-op program?
A. ROI on activity.

Q. What measurements are important to your organization?
A. ROI, based on revenue.

Q. What are your biggest challenges with your MDF/co-op program?
A. Measuring ROI of activities.

Q. What have you done to overcome these challenges?
A. Implemented requirements for partners to communicate ROI.
A. Understand the importance of being able to demonstrate ROI.

Q. What innovations would you like to integrate into your MDF/co-op program in the future?
A. Better metrics/tracking of ROI.

Q. What changes have you made in your MDF/co-op program in the past 3 years?
A. Heavy ROI scrutiny-a good thing.

Q. What impact have these changes made, if any?
A. Better ROI measurement.

Q. Name one change to your MDF/co-op program that has made the most positive impact?
A. Focusing on ROI.

Q. Name one change to your MDF/co-op program that has made the most negative impact?
A. Funded programs that did not yield an ROI.

Q. 33% of respondents feel pressure from management to discontinue their MDF/co-op programs in the future. Why?
A. Lack of clear ROI.

In these challenging economic times when companies are scrutinizing every internal investment dollar, the last question and response is particularly relevant. Are you currently being asked to justify the value of your channel program? Do you have the ability to report in a timely manner on the metrics which tie your program objectives and activities to positive results? When push finally comes to shove, will your executive management team support your program because you were able to demonstrate a greater ROI versus another company program? It is not an understatement to say that the survival of your channel program may ultimately depend on how you answer these questions.

by Craig DeWolf, CCI

The #1 question I am asked by clients and prospective clients alike has been "How can I measure the effectiveness of my Co-op (or MDF) program?" Interestingly, there are more answers to this question than there is space in this blog. However, in the interest of brevity, the short answer is below:

It depends.

While that response is appropriate for most marketing related questions, my guess is that it didn't completely satisfy your insatiable curiosity as to the answer.

So, here's the longer response (you asked for it).

Each objective should have measurable goals. This becomes the basis for your program. As simple as it sounds, when I get asked the "Measurement" question, my response is another question: "what are your objectives for the program?" Interestingly, the response frequently is: "I don't know." While elementary, the appropriate follow-up comment is: "Then how do you know what ‘effectiveness' is if you don't know what your objective is?" If you treat your program simply as a cost of doing business, then that's what you'll get-a program that sucks money from your marketing budget without providing any realized marketing benefi t.

Step One: Identify Objectives
So, as you probably guessed, the fi rst step in the process of measuring the effectiveness of your funding program is to defi ne your objectives. While this can include something as broad as "increase sales", it can also include intangible objectives such as "Increase partner/retailer loyalty." Either example has ways to measure the effectiveness against goals, albeit very different. The fi rst example would rely on a more quantitative approach of measuring sell-though, while the second example may include (at least in part) a more qualitative approach- such as a survey. Objectives may be either long-term (ongoing) or short-term to address certain market conditions.

Typical objectives for your co-op or MDF program may include one or more of the following:

» Increase sales overall
» Increase sales of specifi c products
» Increase partner share of voice
» Reinforce brand messaging
» Focus spending behind specifi c products, media, or events
» Increase utilization rates (overall, or from select channel partners, or from a select geography)

While these might be some of the more common objectives, there are many, many more. Each example is measurable, and you can choose more than one objective. Just be sure you have the strategies in place to attain each objective assigned to your program.

Step Two: Identify Goals
The second step is to identify goals for each objective and a basis for measuring progress. As you can see from simply reviewing the above list, each objective will require different metrics. While each objective will have a critical KPI (Key Performance Indicator), each strategy deployed to attain any one of the objectives will require associated metrics as well. So don't expect to have this fleshed out on the back of a cocktail napkin after a brief 5 minute discussion at your local watering hole. Completing this step takes some consideration. Take my word for it.

Step Three: Set a Baseline
The third step is to determine the current baseline for each goal which will be used as your starting point. It's often said, "If you don't know where you are now, how will you know how to get where you're going?" Truer words have never been spoken. By defi nition, all goals are measurable. So begin by identifying your starting point. ‘Nuff said.

Step Four: Set Up Reporting
The fourth step is to set up your reporting to identify trends over time. This will not only help you track progress, but it will help you understand the rate of change over time as your strategies evolve. It is worth repeating that you should track progress for individual strategies as well as tracking progress against each objective. It will be these tactics and strategies that you will be adjusting over time to accelerate the attainment of each objective. So, the whole effort is moot unless you track the individual strategies in your quest to deliver a more effective program.

While this sounds simple enough, apparently it isn't and if you're not doing this now, you're not alone. The good news is that it's not too late to start. I'll explore in future blogs ways to assign and measure specific objectives.

Craig DeWolf is Vice President of Sales and Marketing for CCI.

Craig's extensive experience spans over 20-years, across a variety of industries and distribution models. This background has given Craig an excellent perspective of the issues facing marketers and their distribution partners, and the solutions that will make them mutually successful.