Estimating return-on-investment (ROI) is both vital and challenging for businesses, their units and their activities.

  • While simple in concept, ROI in practice consists of both hard costs and soft costs that are allocated differently by different providers.
  • The channel and channel activities are no exception to the challenges of ROI measurement (and in some ways are more complex).
  • Virtually every company department – including those not dedicated to the channel – impacts channel ROI.
  • While the metrics used in channel ROI dashboards vary (and evolve) from provider to provider, it’s vital for partner relationship management (PRM) platforms and dashboard tools to empower accurate tracking across multiple distribution layers.

Author Stephen King says that Henry G. Bohn got it wrong. The road to hell isn’t paved with good intentions, King asserts, but adverbs. But any channel chief can tell you they’re both wrong – it’s paved with discussions about channel ROI.

The pursuit of ROI, for all its challenges, is a noble cause. If you don’t believe us, ask your CFO. It’s also a necessary pursuit that can benefit greatly from ROI dashboards. We talked with eight channel experts to help you build yours.

What is Channel ROI?

The concept of ROI is simple enough. If you invest in something, you hope to get more back than you put in. The calculation – at least in concept – is just as simple. Here’s how Investopedia advises its site visitors to determine ROI:

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

   Current Value of Investment – Cost of Investment 

ROI = ——————————————————————————————–

Cost of Investment   

But as any CMO, CFO or CEO can tell you, ROI is anything but simple. And you don’t have to plummet down the rabbit hole pursuing concepts like net present value (NPV), discount rate or internal rate of return (IRR) for things to become complicated – especially when discussing nearly any business activity. That’s because of issues like time horizon, revenue and expense allocation, fixed costs vs. variable costs and – as oft as not – C-suite philosophy.

The channel is no exception. Only instead of struggles with concepts like how much to invest in customer retention programs (and, later, how much of a difference they made when facing a new competitive dynamic), channel leaders face questions like: 

  • What’s the ROI on tradeshow participation?
  • How much does channel revenue contribute to our cost basis?
  • How do we cost justify sales teaming between our inside reps and channel partners?
  • How long will our new channel program take to achieve ROI?
  • How do we achieve ROI competing with firms offering aggressive SPIFFs and compensation?
  • So many more – virtually all business challenges are mirrored in channel programs.

 The elephant in the room for all of these issues is that businesses – and their channel programs – are dynamic. And so are the markets and competitive landscapes in which they operate. This means that detailed ROI models and assumptions need to be developed and agreed to with the unique characteristics of each organization.

 At the same time, it’s essential to avoid becoming hamstrung in paralysis by analysis when developing or expanding channel programs that may not have sufficient scale for hard ROI (aside from projections). This is where ROI indicators (in the form of metrics) come in. The right KPIs and other indicators can help channel programs gain their bearings and pursue improvement regardless of issues like program stage, allocation and other factors.

To help you gain your own bearings, we discussed the challenges of Channel ROI with eight channel experts and developed a list of six Channel Dashboard ROI tips you can put to work on your behalf.

How Departments Aside from Sales and Marketing Contribute to Channel ROI

Channel chiefs sometimes face challenges when communicating that every department in the company impacts channel ROI – engineering, provisioning, customer service… All of it. With this in mind, we asked our experts about how other departments (aside from the apparent relevancy of marketing and sales) impact channel ROI. Here are some key takeaways:

  • Greg PlumAccounting: “Accounting is a critical piece of the puzzle,” says Greg Plum, Principal, Americas-East for Partner Ready. “Since the accounting team is often tasked with tracking and paying commissions earned by channel partners, their accuracy and availability to address partner inquiries greatly impacts channel success.”
  • Systems Engineering: “The systems engineering group may have the most influence of all the departments,” says Dede Haas, Channel Sales Strategist & Coach at DLH Services. “They are definitely the most trusted by the partners and their customers because they are not considered ‘sales.’ They are – besides the channel account manager (CAM) – the go-to people when partners and their customers have technical issues. They are not confronting the partners on marketing and sales issues, but by the very nature of what they do – repairs, troubleshooting, updating/upgrading, explaining the reasons why the product is so important for the partners and their customers – they are listening and fixing a problem. Any recommendations they give will be taken seriously and that can lead to more product or enhancement revenue.”
  • Enablement, Training and Support: “Enablement/training plays an important role with channel program ROI,” says Matthew Peeples, Channel Leader. “An enabled/trained partner that can explain the value of technology from a vendor’s products produces much faster than a partner that cannot. [Additionally], partners that have access to a dedicated partner support team provide a faster ROI than partners that have to figure it out on their own or have to work with the customer to call through the normal customer support team.” All of these factors underscore the importance of having your channel enablement best practices down pat.
  • Product Teams: “Product and product development play a key role via offers and offer definitions,” says Brent Earlewine, Senior Vice President of Indirect Channels, IntelePeer. “At its core, the channel program is based upon what we bring to market via the channel community.” 
  • All of Them: Jon Howes, Sales Director for Juniper Networks, points out that every department can contribute positively to channel ROI. “For organizations where indirect business is the norm, it’s a cliché, but true to say that every department should contribute to the channel program’s ROI model,” he says. “Legal, finance, product support and customer service each play an important role!”

Jon HowesChannel ROI Considerations

The indirect layer(s) in the channel deliver substantial revenue opportunities. But those layers – which could include master agents and distributors as well as direct partners – also create multiple points for ROI assessment. Is your relationship with distributors generating sufficient ROI? What about partners? How about partner enablement and your through-partner efforts? How does your channel partner engagement plan help to drive ROI?

We picked up some helpful tidbits from our experts to help you maintain perspective across all of your ROI-related activities with these realities in mind. Here’s a summary: 

  • Intuition matters: Often – especially early in channel programs when insufficient scope and scale exist for reliable ROI – decisions are made with an intuitive understanding that ROI is “built in” to certain activities. “The classic example of an activity that delivers intuitive ROI is tradeshow participation,” says BuzzTheory’s Khali Henderson. “It really speaks to the power of a strong channel partner. Providers will confidently participate in tradeshows knowing that recruiting one productive partner will deliver ROI, even if they can’t put an exact number on it. That never really goes away, but when programs mature, the same principle applies to partner retention. Providers will work the shows both to gain new partners and protect their existing partners from poachers.”
  • Platforms should enable distributor ROI tracking: “Distributors like master agents can significantly impact ROI,” says Heather Tenuto, Chief Revenue Officer for Zift Solutions. “However, these relationships are complex. You don’t just sign up with a master agent and watch the revenue come in. They have communications plans and sponsorship opportunities, master-only SPIFFs, partner summits with booths and sponsorships, and other incentives that encourage them to promote your products to their subagents. This complexity means you need tools that can track it all and assess ROI at the distributor level without dealing with issues like double counting master-sub contributions or, worse, having no real visibility at all. Your PRM tools should empower you to accurately track partner recruitment and engagement across all of your activities with distributors so you can determine their effectiveness.” 
  • The pandemic clouds some measurements: Even established programs must weather potentially confusing external forces. Mary Moore Cavanagh, Channel Manager for PGi, observes that the pandemic has turned some metrics – such as average time to achieve partner ROI – upside down. “In ‘normal’ times, I would say we would see ROI in about six months,” she says. “However, Covid has changed this, and our channel partners are not as familiar with webcasting and have moved more heavily into the collaboration platforms like Zoom/Teams/and webinar products like GoToMeeting and WebEx. We are seeing the biggest ROI right now from resellers of our product. The irony of this is channel partners would see a larger payout on a webcasting option, but many deal with SMBs and they have no need for a webcasting platform.”

Channel ROI Dashboard Tips from the Pros

We asked our experts for tips on building channel ROI dashboards to help you develop and refine your own dashboard. They provided sage advice covering everything from ROI philosophy to metrics that help to drive partner engagement best practices to dashboard KPIs themselves. Here’s a breakdown of their tips:

Tip 1: ROI is in the Eye of the Beholder

As we indicated earlier, determining ROI on individual activities is both an art and a science. DLH’s Haas points out that determining ROI varies from company to company. “ROI is viewed differently by different vendors based on what they think is important,” Haas says. “Unless they are strictly transactional, there is so much more they can add to what they think is an appropriate investment.”

Dede Haas“How do they measure ROI? Is it by revenue alone, or is market share included? ROI is usually measured on hard numbers like revenue, but what about soft numbers or no numbers at all? Some vendors may measure their investment in the channel based on how many of their partners have gotten certified. They can assign a number to that and add it to the calculation. In my opinion, it is whatever the vendor wants to measure to determine what they consider is an ROI.”

Tip 2: ROI May Be Relative

BuzzTheory’s Henderson agrees with Haas and points out that some companies determine ROI by comparing the costs of customer acquisition from one activity to the costs of another. “You might compare the results of sponsoring a distributor’s annual partner meeting against the costs of acquiring those partners outside of the event,” she says.

Even this kind of measurement could vary from one vendor to the next. “Vendor A might look at straight partner acquisition costs, and Vendor B might also factor in the time-to-revenue benefits of gaining multiple productive partners at once,” says Henderson.

 “Either way, the comparative approach provides a meaningful frame of reference that keeps companies from becoming too bogged down in tricky issues like soft-cost allocation. They know they must recruit partners regardless of those factors. The ability to measure the performance of a targeted boost in spend against their day-to-day recruitment activities provides enough data for them to know when they’re moving in the right direction.”

Khali HendersonTip 3: Sometimes ROI Indicators Are Simple Benchmarks

Speaking of moving in the right direction, Tenuto of Zift Solutions adds that, for many companies, ROI indicators are a matter of taking a snapshot of performance today and comparing that performance over time. “So, you don’t have all your ROI factors worked out,” she says. “Improving in vital KPIs signals improving ROI.

“This is another reason you need a PRM with strong reporting and API capabilities,” she said. “And it’s not just about partner acquisition. It’s about partner engagement and retention and how to improve both metrics.”

Heather TenutoTip 4: Don’t Overlook ROI Indicators at the Partner Level

Partner Ready’s Plum points out that ROI indicators apply at the individual partner level as well. “Deal registrations moving to discovery stage is a major indicator of your partner’s understanding the value of your service and your optimal target customer,” he says. “If fallout at the deal registration stage is excessively high (compared to other sources of business), it would make sense to spend time with the partner to ensure alignment.”

Peeples also points to partner-level indicators. “At the simplest level [you have] badging and deal registrations,” he says. “For more mature channel programs [you have] tracking customer satisfaction of working with a partner, partner satisfaction in the channel program, partner portal engagement, joint-business planning, additional sales of multiple products, average discount requested above program level, etc.”

Matthew PeeplesTip 5: ‘Human ROI’ Is Harder to Calculate with Metrics

“[Determining ROI] really depends on what metric is homed in on,” says PGi’s Cavanagh. “If you are looking at the ROI on spending money at a master agent event, then you can do that with sales stats.

“The human ROI is harder to gauge.  Did you become a trusted advisor for a channel partner by doing extra training/being responsive?  Longer-term sales dollars answer the question, but in the short term, [it’s] harder to gauge … and at what point [are you] in the ROI negative because you’ve sunk time and effort into a channel partner without any return?”

Mary Moore CavanaghTip 6: Track KPIs

Howes of Juniper Networks and Earlewine of IntelePeer offer up some KPIs they like to track. They include:

  • Active Pipeline Value
  • Average Deal Construct Size
  • Average Deal Value
  • Conversion Rate
  • Cost Per Lead
  • Funnel Velocity
  • Joint Business Planning
  • Leads Provided
  • MDF Spend
  • Number of Current Opportunities
  • Partner Investment Cost
  • Ramp to Revenue
  • Resource Allocation
  • Sales State Per Lead
  • Win/Loss Ratio

Brent EarlewineA deep dive into other channel program KPIs is available in our channel reporting dashboard article here.