I recently read an survey performed by a noted consultancy which stated that global program standardization managed via a common infrastructure was among the top 3 investment priorities in 2010 for global channel marketers within the technology industry. This is of no surprise considering that technology has changed through the years thus enabling infrastructure standardization to exist. That makes perfect sense...after all, what home office in their right mind would want to disseminate funds and program authority to channel partners on a global scale to spend willy nilly without having any controls in place? (BTW: "willy nilly" is a technical term for "hap hazardly" which itself is a technical term for.....well, never mind).

Well, at least one vendor we know well does...after 2 years of going to a completely centralized model to manage their global programs, they have announced intent to move back to a decentralized model permitting only local controls of program design and execution. This shift back makes perfect sense to me too. The "promise" of globalization and standardization sounds great and all, but under the mantra of "think globally, act locally" perhaps there is an admission that business practices require attention to local needs and customs as much (or in this case more) than centralized insight and controls. I've often attested to the fact that the best position is somewhere in the middle, but often the forces of office politics are at work. The pain is real strong on one side, so the tendency is to compensate by moving to the extreme opposite side, sighting: "See, I told you that having the pendulum on their side wouldn't work".

Hmmmm, the more things change, the more they stay the same.

Enough about me, lets transfer the idea of complacency to you now. It amazes me how many marketers-particularly those in a dynamic industry like technology-maintain their channel programs year over year and expect better results. If you fall within this category, I remind you that it fits the definition of insanity-"doing the same thing over and over and expecting different results". So, I guess it's time for you to overcome your complacency.

Face it, your business objectives change, the economic environment changes (or so we hope), your competitors certainly aren't sitting still, why are you doing the same ol' same ol'? In fact, we recommend reviews no less often than annual with a schedule for quarterly enhancements likely. Yet, it's common that I see programs carry over with minimal revisions 3-5 years or more.

If you answer "yes" to any of these questions, it's time to review and revise your channel program NOW.

• Are you introducing new products or services?
• Do you expect changes in your channel composition this year?
• Has your sales goals changed since last year?
• Do you expect to recruit or release partners this year?
• Is your staff more or less capable of managing the program than last year?
• Is your competition sitting still?
• Are you confident that you can evaluate-and indeed report on-- the true ROI of any one of your programs?

Ok, then. You know who you are. Your channel programs are not a cost of doing business; they are your competitive advantage. I have to believe that, I'm in the business of promoting that. My promise to you in return is that many more articles will come on this site that will help you simplify the process and guide you through the right decisions-really. Stay tuned.

The good news is that it's getting manufactures to see the true opportunity in their promotional allowance programs relative to being merely a cost of doing business. As such, everyone is asking: Should I move from a co-op program to and MDF format? The answer is, like most things in marketing, "it depends".

For the record, "co-op" is often defined as ‘an accrual based program that allocates promotional allowances to channel partners based on past sales performance'-usually allocated as 2% or 3% of sales from a prior period. Conversely, MDF funds are more discretionary by allocated channel partners funds based on expected future performance. An attributes of the co-op funding model is that partners can easily predict what their budget will be, therefore streamlining planning for the period in question. The manufactures, on the other hand, view this is structure as too much of a perceived "entitlement" for the partners by allocating funds with no strings attached. The argument in favor of MDF is that funds will be allocated based on prior approval of joint sales and marketing initiatives, and therefore will yield a more effective return on investment. In it's truest form, MDF usually means more administration for the channel partners and channel managers alike. Plus, the "discretionary" allocation of funds to partners in practice may or may not comply with the Robinson Patman requirements of fair and equitable distribution to all competing partners. That said, switching to MDF-style programs is in-vogue as more manufacturers seem to believe that such a program structure is more accountable, and thus a more effective approach overall.

In an effort to end that debate once and for all, the "effectiveness" of the program (which I'll define as improved ROI), has less to do with the co-op or MDF designation and more to do with all the other components of a program. The only real inherent advantage of one over the other is that co-op programs are generally ideally suited for "mature" products and channels. Because the available allowances are more predictable by the partner and manufacturer alike, planning for how to spend those funds can be simpler, even IF prior approval is required for funding individual activities. Conversely, MDF is generally the ideal structure for dynamic channels in which either the partners make-up or product category is rapidly changing, such as moving from "early adapter" to "mature" category. In that rapidly changing environment, what happened last period is of little consequence to what has to happen now or next month, and therefore the traditional co-op model is impractical. In any case, there is no evidence that either funding model is more effective than the other-considering all other things as equal (and there's the catch).

Hybrid models are gaining in popularity where co-op and MDF co-exist. Both can be offered to any one partner, or co-op is offered to one set of partners and MDF to another. In the case of the former, vendors may use co-op to fund basic programs, such as traditional marcom programs. Administration can be simplified, and as long as guidelines are followed, resulting expenditures can address mutual needs. Using such a hybrid model, the MDF fund would be used to fund activities that require greater scrutiny and accountability-as activities are harder to evaluate against a finite set of guidelines.

In the end, there is no one right answer to "best practices" relative to program structure which apply to all vendors. As long as I've been in this business (over 25-years-shock!), I still haven't seen any two programs alike-even between vendors multiple within the same product category. Hey, this is marketing. The correct program design overall is as much "art" as "science" . It comes down to this: if you can a) measure the effectiveness of your program against program objectives and b) your program fills the needs of your partners go-to-market strategy, then you're on the right track. If your program can't do one or either of those, then you have bigger problems than whether it should be a co-op or MDF structure.

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.

Yeah, social media is all the rage in channel marketing these days, but like sex in junior high school, everyone is talking about it, but no one is really doing it.

Clearly, social media has its place in today's marketing mix. That place is defined by your industry in general, and your own social media strategy in specific. So how social media fits in your marketing mix is beyond the scope of this writing, the bigger question often asked by our clients is: "Can/should we reimburse for social media as an activity within our promotional allowance program"? The answer, like most in marketing is "it depends".

Promotional allowance programs at their core are based on:

• Reimbursement for expenses incurred by channel partners to do mutually beneficial sales/marketing programs
• Established proof-of-performance that an activity took place (evidence that can be counted or tracked)
• Provide clear ROI, with business outcomes that are directly attributable to your brand/products
• Assuring message consistency throughout all branded, channel, and consumer communications

Your ability to overcome the challenges expressed above as it relates to social media that will define your answer as to whether it's a reimburseable activity or not in your MDF program.

However, here are some general thoughts on what we're observing today:

• None of our clients are offering reimbursement for social media efforts as of yet.
• One "best practice" may be to provide a comprehensive tool box to help partners start, or contribute to established social media vehicles promoting your brand or products (e.g.: "how to" flash or video content)
• If "reimbursement" is the issue, consider a sponsorship of private social media efforts (user group bulletin boards) that is either ‘flat rate' or tied to overall audience size.
• Consider the development of a sponsored social media vehicle of your own, in which partners are encouraged to participate as the "experts"-this however ignores popular the vehicles already in place, and thus shouldn't be your only approach.

Bottom line: don't feel that you have to be the first on your block to provide reimbursement for social media efforts through your promotional allowance program, but do feel free to experiment and to come up with creative ways to extend your own social media strategies down through the channel to encourage partner participation, collaboration and message consistency.

Wrong: your promotional allowance program should be updated no less than annually to assure the program structure is aligned with your current objectives. What's more, as ROI seems to be the biggest issue expressed by marketers, there are techniques to assure your funds optimized against these objectives. By manipulating any combination of 8 different design variables common to all promotional allowance programs, your promotional allowance program can be both an effective "Carrot" or a "Stick" to:

• Leverage channel budgets to attain corporate objectives
• Maintain and extend existing partner relationships
• Recruit new channel partners with special "jumpstart" allowances
• Penetrate target segments, or geographic markets
• Win channel Mindshare and Share of Voice vs competition
• Leverage partner relationships with their existing customers to promote up-sell or cross sell opportunities
  
• Improve channel "readiness" by enabling training, certification, and sales incentive programs

Depending on your industry, these promotional allowance programs can fund or encourage WAY more business development activities that simply advertising, including:

• Demo Programs
• Telemarketing
  
• Events
  
• Purchase/Sales incentives
  
• Training and certification
• Facilities

Programs of these types are common to all channel programs today-all of which are core requirements to many channel or vendor businesses to be successful.

So, it's time to re-evaluate your promotional allowance program to assure it's aligned with the go to market strategies for your and your channel partners.

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.

In these challenging economic times where every business expense is under scrutiny, the cost for running a channel program is also under the microscope. Every aspect from headcount to administrative processes to partner funding is being assessed for value and ROI. In some cases, whole channel programs are being sacrificed to preserve other mission critical functions within the company.

Outsourcing -- the practice of using outside firms to handle operations normally performed within a company -- is a familiar concept to many businesses. Companies routinely outsource their payroll processing, accounting, distribution, and many other important functions - so what about channel management programs?

From experience in serving our own clients, we have determined five compelling benefits for outsourcing channel program management:

1. Controlling costs
Cost-cutting is arguably the most significant factor in outsourcing a channel program. Companies can realize savings in two functional areas: funding budgets and operational efficiency. Reducing errors in payment calculations alone can often justify the investment in outsourcing.

2. Increasing efficiencies
Companies that do everything themselves have much higher rates of interaction between their marketing, administrative, financial, and executive departments. The time spent on communications and manual processes among program stakeholders can be cut in half through outsourcing.

3. Reducing labor costs
Adding and training full-time staff can be very expensive and temporary employees don't often live up to expectations. Outsourcing channel experts such as account managers, creative consultants, and compliance auditors can reduce time to perform administrative tasks and their associated labor costs.

4. Focusing on core business
Every business has limited resources, and every manager has limited time and attention. The outsourcing of management services can help companies shift their focus from peripheral task-related activities to strategic actions that better serve the channel partner and ultimately their customers.

5. Reducing risk
Markets, competition, government regulations (including Sarbanes-Oxley), financial conditions and technologies all change very quickly. By outsourcing to subject matter experts with strategic and tactical knowledge in managing channel incentive programs and their funds, companies can avoid unnecessary risks and maximize opportunities for program success.

A necessary first step to begin your evaluation of outsourcing is to identify each existing channel program process and assign a time (how long does it take?) and cost factor (how many dollars spent in labor and materials?) to it. Even if you ultimately choose not to outsource, this benchmarking step will consolidate all costs associated with your program and ideally illuminate processes where savings can be realized. In my next blog, we will discuss these processes and offer examples of how you can estimate time and cost.

Michael DeBarros is the Business Development Manager at CCI. He is a veteran of 22 years in technology sales and has held channel management positions at two leading software companies. Michael's experience in working for both partners and vendors offers unique insight into today's channel challenges.

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.