As I meet with prospective clients, I’m continually amazed at the breadth and depth of challenges they face within their channel operations.  These challenges run the gamut from inconsistent channel data collection to inaccurate product and business entity identification, manual processing of special pricing credits, inability to reconcile sales-in with sales-out data, error-prone commission and incentive payment calculations and so on.

The challenge for many of these companies is not in identifying their problems, but in determining where to get started.  When facing so many challenges it’s critical to identify a “quick-win” that can be delivered on in 30 days.  Rapid time to benefit is critical in building project momentum.  Break the project into multiple discrete pieces that deliver value quickly.  Build a plan around the larger vision and strategy but attack one problem at a time and deliver incremental business benefit — quickly.

 Btw, Rework by Jason Fried and David Heinemeier Hansson (http://www.amazon.com/Rework-Jason-Fried/dp/0307463745/ref=sr_1_1?ie=UTF8&s=books&qid=1274280171&sr=8-1), does an excellent job of espousing Agile development principles and the benefits of incremental successes.  A good, quick read.

At a channel management conference last month, partner loyalty was a key topic. As vendors and products proliferate, competition for the time and attention of your channel partners continues to increase. Competitive products, qualified leads and strong service and support are all keys to partner loyalty…but they’re mostly out of the control of the channel sales and operations team.  So if most of the items mentioned are out of your control, what are the key elements that are under the influence of the channel sales and operations team?

A couple of the key items that you control are (1) optimizing your partner’s working capital and (2) being easy to do business with.  Are these the top areas that you influence and or control?  If so, do you have a plan to address them for your partners and to turn your channel operations team into a competitive differentiator.

Speeding the delivery of incentive payments; eliminating the time partners spend claiming and administrating incentives; providing timely performance scorecards to your partners for visibility into their performance against program targets ─ these are among the many operational elements directly under your control.

What are some of the other areas that you can control and what are you doing to turn your operation into a competitive differentiator?

A fundamental truth … good sales people always perform according to their comp plan. The best sales people know their incentive plan inside and out (btw, get rid of the ones who don’t understand their plans) and know how to maximize their earnings according to that plan. Larry Ellison, the CEO of Oracle Corporation, recently shared these thoughts regarding a Sun Microsystems’ sales team that understood their plan:

“More infuriating”, says Ellison, “is that Sun routinely sold equipment at a loss because it was more focused on boosting revenue than generating profits. The sales staff was compensated based on deal size, not profit. So the commission on a $1 million sale that generated $500,000 in profit was the same as one that cost the company $100,000″, he said. “The sales force could care less if they sold things that lost money because the commission was the same in either case,” he said.

http://abcnews.go.com/Business/wirestory?id=10630034&page=2

The Sun sales team was doing a good job at executing their plan. Drive revenue regardless of the discount and impact on profit.  But Sun isn’t the only product vendor paying commissions on list or catalog price vs. net price. In fact, many leading companies that sell through distribution channels don’t know the net-price to the client and therefore they inadvertently encourage a similar behavior. They often try to address this issue by setting quotas at a list price level, but that only adjusts for the commission pay-out it doesn’t discourage the bad behavior of eroding your market price.

The best practice is to implement a sales plan to pay your sales team on net-price, the catalog price “net” of all direct incentives. The channels team should be compensated net of all incentives such as rebates, MDF, Co-Op funds, etc. Channel partner volume incentives are paid on the net price after special price discounts. The direct sales team is compensated on the true net-price to the end customer thus ensuring that they will seek to minimize discounts and maximize your companies’ profitability.

Many of the companies I speak to have a patchwork of solutions, spreadsheets, and homegrown code to try and tie their channel information to the rest of their enterprise systems.  The resulting time-consuming data collection, matching, and reconciliation make it nearly impossible to understand channel performance in real-time.  However, as we have observed in this blog in the past, the cloud is beginning to simplify access to information.  CRM is one of the first enterprise solution areas to benefit from this change, in no small part due to Salesforce.com.

Salesforce has brought simplicity not only in terms of the adoption and deployment of the application itself, but also in its ability to use the AppExchange and Force.com apps to quickly and seamlessly tie components together through the cloud.  As a result, POS data can now be tied directly to CRM accounts providing channel visibility in Salesforce similar to that for direct sales.  Even though these integrated solutions have been around for only a short time, users have already identified Best Practices for their use.  Based on our research, here are some of the most important:

• Automated linkage of channel and direct activity to Salesforce accounts
• Presenting account “candidates” with comprehensive POS data for potential inclusion in managed account programs
• POS used to target cross & up-sell opportunities to increase revenue
• Improve efficiency and confidence in commissioning by providing transparency into transaction assignment and sales team management native within Salesforce.com
• Channel sales and inventory activity available for integration with other cloud-based vendors to deliver incremental functionality

Companies that have demonstrated these practices have consistently outperformed their peers in terms of revenue growth and gross margin from the channel.  Is cloud-based integration to Salesforce then truly “the Force”?  Well it’s certainly a key component.  Of course you also need accurate, timely and complete POS data, but using Salesforce.com to view, analyze and act on that data definitely seems to have a “Jedi”-like impact on the ability to achieve best practice performance.