The State of Channel KPI Usage
In this quarter’s Channel Pulse, we decided to take a closer look at the state of channel KPIs and channel transformation across all verticals. If you want to understand what drives an individual or organization to perform better, always look first at the measures of success. This occurs in public markets where stocks are traded. Usually, the stock price often reflects revenue and earnings and as a result, the market rewards high growth and earnings.
When it comes to the distribution channel, brands often look at this differently from their resellers and distributors. Resellers and distributors are very bottom-line driven unless the brands they serve focus them elsewhere. Brands focus the channel through goals and objectives and track progress toward them through Key Performance Indicators (KPIs).
What Channel KPIs are being measured?
To dive a little deeper on tactics used to drive transformation, we asked about non-revenue Key Performance Indicators (KPIs) being used to measure channel performance and transformation.
What we found was no big surprise. The number one channel KPI was Engagement. Brands are insisting their channels utilize the programs available to them. On the other hand, we were surprised they didn’t appear to be using enrollment or redemption rates as measures.
What do these Channel KPIs tell us about the state of the channel?
Beyond engagement, brands also seem focused on Demand Generation. They measure this by the funds spent in market development (MDF) and pipeline size and growth. This is clearly the focus area when you get beyond general engagement.
Also important are secondary measures of demand generation with channel KPIs such as sales and technical resource utilization, demos and deal registrations. All of these measures track how active the sales channel is with the brand’s products or services.
Customer satisfaction and enablement are the next tier which offer more quality measurements. These measurements focus the channel on knowing the products and sales techniques necessary to ensure engagements from demand generation efforts are productive. They are by financial measures of efficiency like opportunity conversion rates, renewal rates and margins.
Focus is Top-of-the-Funnel
By looking at the bigger picture, we see brands focusing the channel on top-of-the funnel activities. In the past, interactions between brands and the channel tended to focus on short-term revenue generation. Through KPIs, brands have clearly evolved beyond this.
While collecting data for the latest Channel Pulse it was clear that most brands have a pretty wide set of KPIs in place. We asked which KPIs they used and gave them the opportunity to select from a pick-list and also add others. We didn’t see a great deal of other entries, but we did see many choices from each survey respondent.
Do non-revenue KPIs impact channel compensation?
Having managed a large channel in Tech in the past, I know the channel respects what impacts their bottom line. To that end, we asked if the KPIs used were aligned with the channel’s compensation? We found more than 50% of brands using non-revenue based channel KPIs tied them back to channel earnings.
If we step back, what we find is approximately one third of organizations using channel KPIs tie them to earnings. Another one third are using KPIs without a financial impact, and the final one third are not using KPIs at all.
It’s clear KPIs are being used much more extensively than in the past. We also noticed that it wasn’t any one industry driving the use of KPIs. We saw strong usage across all industries surveyed.
KPIs are one of the best tools a brand has to get the channel to think beyond the deal of the moment. It’s a cultural change when they are first introduced, which is why many organizations don’t tie them immediately to earnings.
All of this fits the dialog we are hearing around driving channel transformation. We expect to see more and more companies using KPIs and we expect the tie to earnings to grow over time. The data seems to strongly indicate this trend.
To view the detailed findings from the Q2 Channel Pulse™ report, visit www.TheChannelPulse.com.
The report is made available free of charge to any interested party. Those interested in obtaining a copy and/or participating in the Channel Pulse community and any future reports or events can do so at www.TheChannelPulse.com. For more information about 360insights, visit www.360insights.com.