Wednesday, November 14, 2007

Channel Marketing Investment - How much did we spend and why?

Do you know how much of your marketing investment is dedicated to your channels? Not just co-op and market development funds(MDF), but also the investment in other marketing activities that are intended to either directly or indirectly support the channels. This may include "ground cover" as some people would put it. If your answer is no, then you're not alone. Few companies have a more holistic understanding of their investment in the channels, let alone their return on that investment. In addition, most channel-centric companies are afraid to modify their investment in the channels since they don't quite know what will happen; taking a stance of "if it's not broken, don't fix it".

With cost pressures on marketing only increasing, this strategy will need to change, and quickly. The challenge is even greater for those companies just beginning a channel marketing program. . . trying to decide how much to invest in the channels and how to manage and track return of that investment.

Here are some key findings from recent IDC research:

-IT vendors must increase their investment in marketing to support an expansion in indirect sales. IDC has modeled the change in marketing budget ratio (MBR), or marketing investment as a percentage of revenue, based upon shifts in revenue from indirect sales. This shift will vary depending upon the size of the company, segment-specific variables, and business mix or other factors, but the trend is clear that support of indirect versus direct sales requires additional marketing investment. (feel free to contact me at mgerard@idc.com to receive a report which summarizes this relationship for software companies)
-In addition to the level of overall marketing investment, the marketing mix also changes as collaboration with reseller channels increases. For example, IDC research indicates that events and direct marketing program spend allocation as a function of total program spend decrease with increasing investment in the channels. The key take-away here should be that you need to review your marketing mix carefully as your channel strategy and investment shift.
- Initiate a channel marketing performance measurement program if you haven't done do already. This strategy should include development and tracking of operational metrics (e.g., channel marketing investment as a % of revenue, investment throughput) as well as execution-focused metrics (e.g., lead generation metrics). Collaborate with your marketing operations team to advance this agenda if you haven't done so already. (what's "marketing operations"?. . . . glad to send you a copy of my recent study in this area if you're interested mgerard@idc.com)

Also, check out a recent article in B-to-B for additional information on channel marketing.

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