Calculating the ROI of Through-Channel Marketing
Sherry Foster
President & Co-founder at AscendX Digital | Global Marketing & Business Executive
With a looming recession, there’s an extra sharp lens on budgets of all kinds, and high on the list of evaluation criteria is ROI.
The two main line items for Channel leaders are their people budgets (Channel sales, Partner Account/Business Managers, Channel Operations, and Channel Marketing), and their program dollars. Program budgets include things like training & certification programs, channel incentives, market development funds (MDF), and channel marketing initiatives. So how does a leader determine where to invest? It all comes down to return.
Through-Channel Marketing (TCM) “represents the third stage for channel sales and marketing leaders”(source: Forrester), following the automation of CRM and marketing processes. It’s growing fast, and yet many companies are still testing the waters. With the advances in automation, TCM brings about a welcome improvement in the ability to measure the effectiveness and return of MDF and marketing programs and investments.
How to measure MDF return
If you have been in channel marketing as long as we have, you’ll know that it’s especially hard to measure and report on MDF return. For many vendors, measurement is loose at best, and they often throw up their hands, claiming MDF is a “cost of doing business” with partners, rather than a strategic growth lever. We have even heard stories of vendors threatening to cut off MDF if partners didn’t provide real metrics, only to pay out the MDF the next quarter because, well, what other choice did they have?
Through-Channel Marketing can connect the dots and provide real metrics.
TCM analytics can tell a manufacturer or a distributor which marketing messages and activities are resonating best and driving real engagement with potential customers. For example, we tell our clients how many views they had of their own content across their partner ecosystem, which content was the most popular, which posts had the most engagement, and which documents were downloaded most often. We know the open and click through rates of Ads and emails that are sent through partners, and how many leads were generated. And we can look at it across campaigns, or by partner. Vendors can review and optimize and invest in MDF activities and partners that are driving the most engagement.
But at a deeper level, we can calculate return on investment, and there are 2 categories of attribution – directly attributable revenue, and indirectly attributable revenue. Here’s how we do it.
Directly Attributable Through-Channel Marketing Revenue
This is the most intuitive. As customers click through on social posts, emails and paid ads, view content, and convert online, leads are generated, partners follow-up, and deals are closed. We track deals in the TCM partner portal, and we calculate ROI. If your business is transactional, customers can convert directly on a centrally-managed store for even tighter reporting.
Indirectly Attributable Through-Channel Marketing Revenue
This one is less intuitive and a little harder to measure, but that doesn’t make it any less valuable. In fact, one could argue it’s just as valuable (if not more). Through-Channel Marketing not only gets vendor content in front of more customers, but it also enables your partners to immediately participate in the customer digital journey. Their digital presence is elevated such that they are “found” by customers who are actively looking for your/their solution, and that should not be underestimated.
McKinsey & Company reports that “100% of B2B customers prefer omnichannel, no matter the industry, country, size, or customer relationship stage. There are no exceptions.” Omnichannel means that digital is key – 82% of B2B buyers utilize search to interact with a company before making a purchase, and 84% of B2B executives use social media as a source for making those purchase decisions. Partners need to participate in the digital journey. They need to be where those buyers are searching and researching, but most of them need your help to get there. Small and medium sized partners (aka “long tail” partners) are tight on resources. Studies indicate that 84% of them don’t have in-house resources and struggle to transform to new ways of marketing, even with MDF incentives.
TCM does exactly that and partners will reward vendors for it.
In our experience working with vendors and partners in TCM engagements, 75% of partners reported that they believed the vendor with whom they had TCM benefits “invested in the success of their business.” Additionally, when growth rates were calculated by vendors, the partners who participated in the TCM program had significantly higher growth rates than those who did not.
Partner loyalty and “stickiness”, while somewhat more difficult to measure, are even harder to develop, but worth their weight in gold.
In addition, the joint brand marketing – between you and your partners – is an immediate lift for your both your and your partners’ brands and credibility. Think of it as two-way-advocacy across hundreds, or even thousands of partners, and in front of millions of customers.
The exponential brand awareness should not be dismissed.
Boston Consulting Group (BCG) explains that while “Companies often debate the value of B2B brand marketing, underestimating the value of brand marketing is a mistake.” BCG’s research shows that companies which are “more mature in terms of brand marketing generate higher ROMI [return on marketing investments]; and moreover, strong brand marketing capabilities actually reinforce performance marketing, leading to better engagement overall.”
And those that invest are seeing real results. BCG reports that “B2B companies that have reached the amplifying level of maturity perform far better, generating returns on their brand marketing investments that were 46 percentage points higher than those at the nascent level.”
This research is consistent with our experience. More customers see your brand, and your partners reward you for it with loyalty, and, wait for it – more business revenue.
So exactly how much is the return?
Let’s take an example.
Company A wants to launch Through-Channel Marketing as-a-Service (TCMaaS) for a subset of their long-tail partners. The recommendation for Google Ads for the Channel would be to start with a smaller subset of the partner participants and increase over time.
The Numbers
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The Cost
The cost depends on the complexity of the services that Company A chooses and the number of partners in the program, but they can expect to pay between $20-120 per partner per month for TCMaaS. (The more partners, the lower the per partner fees) Additionally, they would re-direct a portion of their existing paid Ads media budget to their partners and pay a platform & agency fee commensurate with the amount of media they choose.
The Return
Depending on how many partners Company A includes in their TCM program, ROI can be 20 - 30x.
For the indirectly attributable revenue, we calculate the amount of growth that the long-tail partners represent and boost that consistent with what we have experienced with our clients. The increase comes from the brand marketing, the partners being “found” online through web content, social media, and more active communication with their customers. Company A’s content on the partner sites boost engagement and overall credibility, and the relationship with between Company A and their participating partners is stronger. When you add the Google Ads, the boost is higher.
The ROI will build over time. Company A and their partners will experience benefits immediately, but the ROI will grow as the TCM program continues to work. For example, one client saw a 75% improvement in their cost per click with Google Ads over a 2-year period.
How to fund a new TCM initiative when budgets are shrinking
Company A has 15% of their MDF unspent each year. This represents $1.3M in MDF that is not producing the 2.5x expected return of $3.3M. We recommend re-allocating a fraction of this to support Company A’s long-tail partners with a Through-Channel Marketing initiative that will drive new revenue, new brand awareness, and a fresh new direction for Company A and its partners.
The return of $3.4 - $13.1M far exceeds $3.3M of lost return from the unspent MDF – even at the lower partner participation rate. AND since the Through-Channel Marketing costs a mere fraction of the unspent MDF, there’s still room for Company A to reduce overall spend, if required.
If you happen to be a distributor, then you’ve got a whole other opportunity to fund your TCM initiative, namely from your own suppliers who also want to get their products and services in front of your partners’ customers. Your vendor suppliers have their own MDF that can flow to you for the new digital marketing opportunity.
Calculating the value for partners
There’s a strong business case for partners to want to participate. If each partner had to pay for the digital marketing services themselves, it may very likely be much more than they could afford to do on their own – if they even had the resources.
Instead, partners have the unique opportunity to participate in a TCM program and leverage that $60k investment that their vendor or distributor is making on their behalf, learn the digital ropes, and grow their businesses.
Through-Channel Marketing as-a-Service
There are many benefits to TCMaaS. You can read more about that here. But in the context of ROI, accessing TCM as a service delivers more. One key reason that companies don’t realize the return when they launch TCM themselves, is the lack of access and expertise across a multitude of required resources, namely:
Accessing a service that includes all of those resources is a less expensive option, and with an efficiency factor that improves overall service delivery, drives a faster time to market, improved overall performance, and a better ROI.
Why you should invest in TCM now
Three reasons.
Calculate your own ROI
If you want to explore TCM for your company and try our TCM ROI calculator for your own expected return, contact us. We’d be happy to show you how it all works.
Schedule a meeting with us to calculate ROI for your company