Today, high-tech companies are spending close to half a billion dollars every year to collect, clean and analyze their channel data in order to gain visibility into their channel business, market share and pricing pressure, and create the right sales incentives for their internal and channel sales organizations. Almost 85 percent of this spend is on internal tools, processes and people, and about 15 percent goes to external solution providers and business process outsourcing (BPO) companies. The question is: Are these tech companies getting their money’s worth?
Recent market information published by GSA, IHS and other sources indicates that developed countries are reaching saturation in terms of consumer ability and desire to consume new generations of technology. They’re also concerned that the promise of connected devices, sensor-filled cars, homes and medical devices are yet to drive the next big wave of growth. With this backdrop, the fact that developing economies are growing, but consuming older-generation technologies presents CEOs of tech companies with a real challenge—how to grow the business? This is partially addressed by the numerous acquisitions and the ongoing consolidation of the market. But companies still need to improve their organic growth and they can if they intelligently leverage channel data.
Channel data is critical to providing companies with visibility into the sales activities in their channels, into inventory levels, market penetration in geographies and new application markets. It is critical to understand which marketing and incentive programs are delivering value and which should be stopped, and it is critical in order to compensate sales and channels correctly. For this data to be useful, it needs to be made available quickly and needs to be clean. This data needs to be enriched, completed, segmented and analyzed if it is going to drive insight. And for this data to initiate action, it needs to be integrated into customer relationship management (CRM), enterprise resource planning (ERP) and revenue management applications, including quoting, contracts, deal analysis tools, pricing analysis tools, and rebates and incentive management solutions. Most solutions and BPO companies fall short in all these areas.
Anyone who manages channels and has to deal with channel data will concede that the data never comes in quickly enough, it is rarely clean, and requires significant work to be converted into information, insight and actions.
So let’s explore the specific challenges associated with channel data management in more detail:
- Timeliness. Most companies face multiple challenges on this front. Starting with the different cadence of point-of-sale (POS) and inventory submissions from different channels, followed by late submissions, incorrect submissions, electronic data interchange (EDI) error issues and last, but not least—no submissions. It is not atypical to see tech companies unable to collect data from as much as 25 percent of their channels. To combat these issues, companies spend time, energy and internal personnel on handling this process. Those who subscribe to traditional BPOs may find some cost reduction relief, but since these BPO offerings use mostly people to manage the process, the aspect of timeliness is not really addressed.
- Cleanliness. Channel data is notoriously unclean. Customer names are spelled incorrectly; and product stock-keeping unit (SKU) numbers, prices and dates all have errors, and very often, information provided is incomplete (e.g., customer name and address may be provided, but not the state or zip code). Data from Asian markets presents its own set of challenges. Tech companies spend significant resources to develop smart tools, fuzzy logic and algorithms to bring the raw data to a state where it can actually be used. Again, some select BPO options and reduced internal costs somewhat. However, they still have to go through the cleaning process for every submission and this involves manual error-prone work.
- Data to information and insight. Cleaning the data makes it useful, but it is still only raw data. In order to convert the data into information and insight, the data must be enriched with missing information, and segmented and categorized based on markets, geographies, applications, channels, customer types, etc., so these classifications can be used as business intelligence tools in a meaningful way. Most companies’ internal tools and resources are challenged to keep up with the scope, and BPOs also strain to scale their output to provide these services.
- Insight to action. Using POS and inventory data to drive actions, such as where to focus sales and marketing resources, paying out rebates and incentives correctly, applying POS lines to volume commitments in quotes, contracts and order processing in ERP, accruing financial liabilities correctly and recognizing revenue, are examples of day-to-day actions that rely on channel data. Most companies depend on a set of manual processes and homegrown integrations to manage such processes. Most BPOs offer very limited help, which does not scale. Not only does this approach entail higher costs, but it also does not guarantee accuracy. This author witnessed firsthand how the handoff of data between BI tools and ERP causes companies to incorrectly miss millions of dollars of revenue that were mistakenly not recognized, millions more overpaid to channels, as well as the incorrect payment of sales incentives.
All of this impacts sales effectiveness both with internal sales and in the channel. Sales people who have their compensation impacted by channel sales will spend 15 to 20 percent of their time verifying and matching POS lines to opportunities in their CRM. Ineffective rebate programs remain in place, draining margins, but driving no growth. Competitors gain market share and sales leadership is slow to respond. According to Gartner, fixing the issues in channel data management can help companies grow channel sales by 5 to 10 percent.
So What Is Needed to Effectively Manage Channel Data?
- Technology. While it should be a no-brainer for tech companies to use technology, it is not as obvious as one would think. Companies resort to employing internal teams and outsourcing to BPO companies using sometimes hundreds of people managing data collection and cleansing. The reality is that only advanced technology can provide a sustainable and scalable solution that will enable people to help refine and enrich the data.
- Active partner management. By engaging with partners directly, the combination of people and technology assures more complete data collection, resolves errors, and assures timely and fast collection of channel data.
- Critical mass. In order for end-customer validation and data enrichment to work, the solution provider must collect data for thousands of channels and tens of thousands of locations and branches. It must also administer a directory of matching and complete customer data of tens of millions of entities on behalf of many customers. Otherwise, a smaller sampling and fewer companies will not provide the critical mass needed to enhance and clean the channel data.
- Data services. The ability to segment, classify and analyze the data creates that metadata framework that converts raw data into information
- Linkage to action. Linking channel data directly into CRM, quoting, contracts, business intelligence tools, ERP, rebates processing and other related tools is what enables companies to convert their insights into actions, and do so in a timely and accurate manner.
Companies that invest in integrated channel data management solutions are able to increase channel sales by as much as 10 percent, eliminate seven-figure overpayments and reduce internal operational costs by 70 percent.
So what are you waiting for? Take the appropriate steps and begin properly managing your channel data today.