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Could CDM be a channel game-changer?

Apr 30, 2015; By Danny Rowark, Channel Pro

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Hows Channel Data Management (CDM) could be a game-changer for managing channel relationships

Vendors often rely on distributors and resellers to act as their extended sales channels but managing relationships across these groups has traditionally been an unscientific, ad hoc process.

In order to make sound business decisions about a partner network you need to be able to exploit the information that already exists around it – creating a data-driven channel management programme.

In the past, there has been an element of crossing fingers at quarter end in the hope that distributors would send in sales reports, or the vendor may even assign a channel manager to chase up orders and review stock levels, exchanges and returns.

However, today, it’s increasingly the IT managers who are feeling the pressure here. The business has a more urgent need for accuracy and wants the latest figures in real time.

Until recently the limited data that was available was often buried in spreadsheets or in the minds of in-house channel managers. Yet in the past decade, a technology known as Channel Data Management (CDM) has emerged in response to demand from curious enterprises seeking to understand more about their markets, channel partners and channel marketing expenditures.

Extracting meaning from the data

Unfortunately for the majority of vendors their sales and inventory are one or two steps behind where the real demand exists, and they're continually trying to get closer to the edge of the channel in order to figure out who's buying their products, why they are buying, and what needs to be done to move inventory faster.

Within global distribution channels, the main issue often results from vendors receiving and processing data in many different formats from thousands of different resellers and partners. This then requires looking at millions of end customer and reseller records to figure out where the data came from. Add to this the ongoing issue of identifying (and then correcting) wrong product numbers, descriptions, incorrect part numbers...

By solving that problem a manufacturer can finally get access to accurate sales and channel data, and that data in turn can then be used to fill in information gaps.

The performance vs resource conundrum

It's normal for companies to have a specific selection process for adding new channel partners, and some resellers will always produce better results than others. The key for vendors therefore is being able to recognise, acknowledge and continue to motivate these performers.

Vendors design and implement their own channel initiatives, but customers will ultimately buy from the entity that most directly influences the buyer - often a retailer, reseller or value-added integrator. So the vendor then also needs to figure out which partners are most effective, why they are successful, and what incentives can be offered to help them produce better results.

Channel incentive programmes can consume up to 30 per cent of a manufacturers’ revenue. What’s more, they are often managed without the appropriate data to support them and without adequate analysis and visibility into channel sales results. Essentially it’s been impossible to know how effectively the channel is being managed, if too much is being spent on incentives for partners, and if the funds that are spent are being allocated in the most effective places.

Understanding the channel: the competitive edge

According to industry analysts Forrester Research*: of the technology manufacturers that use channel data management software, 80 percent build their own systems from scratch and 20 per cent purchase a commercial product.

Anybody who has tried to cleanse their own channel data has found that this is an IT function fraught with problems. It's a complicated, time consuming process, where 10 percent of the partners and up to 20 percent of the SKUs are changing at any time. This is where even the best IT organisations often fail.

Processing wildly variegated data, and dealing with a flow of new partners and associated rules, can be expensive and in-house systems struggle with scalability.

This is then the challenge for those in the IT, marketing and sales departments: to take this data and help refine processes whilst also creating significantly improved market intelligence. Something that can also be used by management to improve visibility; leading to improved results for companies that sell through extended sales channels.

Best-of-breed CDM solutions are now liberating the intelligence that has been previously locked in channel data in order to improve the management of key business processes. In an era of tight competition, that intelligence could provide a crucial edge to the vendors willing to embrace and act upon it. It’s game changing.