Channel inventory is the foundation of high tech products distribution. Having the right products in the right places at the right time and price can mean sales growth, improved margins, and satisfied customers. Conversely, a channel burdened by obsolete and excess inventory, or product that is incorrectly staged to meet sales needs and promotions, prevents vendors from effectively capitalizing on market opportunities, while driving up costs across the channel. Without real-time channel inventory visibility, companies risk gray market leakage and lost revenue.

As I talk to customers, it is clear that it’s not enough to simply manage where products are currently located. The most successful of them view channel inventory as a competitive weapon.  After all, if a customer asks for your product and it’s out of stock they don’t wait for it to be replenished, they take whatever competitor’s product that is currently available.

The rub, of course, is having real-time channel inventory visibility and the tools to understand what it means.  To solve the channel inventory shell game, you must be able to:

• Collect accurate inventory information from your partners.
• Turn collected data into insight quickly.  Hours, not days, should be your target.
• Calculate expected inventory balances for each partner location and compare to reported balances.  Variances can point to gray market activity.
• Management dashboards that alert on over and under balance conditions as compared to targets and sales trends.

Best in Class channel inventory performers have a strategy, tools and processes for each of these elements.  Do you?

You’ve got to love the world of channels.

In the 2010 State of Partnering study conducted by Amazon Consulting, pay-for-performance incentive programs are the second highest investment priority for vendors behind increasing partner facing staff:

“Pay-for-performance incentives and variable cost programs rank a strong second behind people as having the highest value. These include tiered reselling discounts, deal registration program incentives and performance incentives or rebates.”  

What’s the alternative to pay for performance—paying for “non-performance” or how about paying for “the promise of performance”? Neither option sounds good but due to the limited availability of data it’s what channel leaders are often inadvertently doing.

Performance-based execution within the channel is what Channel Performance Optimization is all about—providing the channel with consistent, complete, and reliable data is the key to effectively running and measuring performance-based programs.  With timely performance data you can work with the channel, just as you do with your direct sales team, to make mid-course corrections and truly accomplish the goal of the incentive and encourage the behavior that increases sales.

You would never consider paying for something other than performance with your direct sales team.  Why would you consider it within your distribution channel?

Bill McDermott, Co-CEO at SAP, made an interesting statement at the recent Sapphire Conference:

“The volume of data in the world doubles every 18 months. The opportunity of the century is to create insights out of all this data…”

Are you prepared for a doubling of your channel data? Your sales team is already spending too much time managing data and searching for information vs. selling.  How much more can manual processes absorb?

The “opportunity of the century” is creating insights out of this data—not in managing the data.

I’ve seen lots of complex models deployed to calculate the ROI of channel programs.  Some involve expensive consultants conducting control group analysis combined with sophisticated mathematical models and techniques but are not easily deployed on a scalable basis. The consultant leaves and the analysis dies.

Bruce Cummings, a legendary channels marketing consultant, (http://www.linkedin.com/pub/bruce-cummings/0/b8b/665) espouses a refreshing approach to determining channel program ROI by using a simple “binary” technique.  This technique compares the sales performance of a group of partners who participate in a particular marketing program with a group of partners who didn’t based on comparisons of actual sales-out data.  Partner group “A” received the incentive during this period of time and their sales grew by x%, while partner group “B” who didn’t participate in the program saw a sales increase of y%.  That’s it!

The binary method is easily implemented on an on-going basis to provide a quick check-up on the potential impact a program is having on sales.  It’s not necessarily definitive but it provides a rapid check that could be done monthly—assuming the timely availability of POS sales-out data during a program’s execution.

It’s a basic but powerful approach, but are you doing it on a regular basis? Are you doing it while a program is being implemented?