By Larry Walsh
The channel is the best, most cost-effective, and most advantageous means of covering the total addressable market (TAM), scaling resources, and reaching customers. That’s the mantra every partnership practitioner learns in channel school, yet they often face the same underlying challenge: How do we demonstrate the channel’s value? More often than not, the inability to do that is a problem of channel attribution.
Channelnomics is frequently asked by channel chiefs and program managers about the most effective incentives and inducements for shaping partner behavior and driving performance. They want to extract more value from the channel and demonstrate to management that it’s worth the investment.
Isn’t this a given? Doesn’t everyone already know how valuable the channel is?
In Channelnomics surveys of channel leaders, two-thirds say they’re under persistent pressure to demonstrate the value and contributions of their partner programs to executive leadership. Roughly 65% of vendor leaders and internal stakeholders harbor periodic doubt about the contributions partners make toward operational and strategic goals.
Intuitively and empirically, the C-suite and boards understand that partnerships are a means of controlling costs, extending capacity, and covering the TAM more efficiently. Yet they continue to question the value they receive from partners. Are partners generating enough revenue? Are they costing too much? Is there a more efficient way to generate sales?
What executive leadership ultimately wants to know is its return on channel investment (ROCI) — what the organization gets back for every dollar invested in partners.
It’s a fair question. The old adage that it takes money to make money holds true, and the channel is no exception.
In general, the channel is the most cost-effective way to cover the TAM. On average, a channel sale is 10% to 15% less expensive than a conventional direct sale. Partners make money only when they perform — selling a product, fulfilling an order, or delivering a service on behalf of a vendor. Direct-sales teams, by contrast, are paid base salaries and consume resources regardless of performance. When a direct seller underperforms, the vendor must cycle them out and invest additional time and money to recruit, train, and rampa replacement. Many partners, meanwhile, bring five to seven years of experience with a given vendor.
On paper, ROCI is relatively easy to sketch out. Take the total revenue generated through partnerships, divide it by the money spent on the channel organization and partner support, and the result is ROCI. On average, vendors spend between 5% and 8% of indirect revenue on channel programs and support. At face value, that suggests returns ranging from roughly12.5-to-1 to 20-to-1 — an attractive outcome, especially when compared with the10-to-1 return typically required to greenlight a new product or venture.
What contributes to that ROCI, however, is where executive doubt creeps in. Without clear attribution of what drives the return, leadership teams and boards are left questioning every line item in the channel budget.
The problem, then, is not whether the channel delivers value. It’s whether vendors can clearly and credibly explain where that value comes from, how it’s created, and how it can be improved.
This is where a more rigorous economic view of the channel becomes essential. Channelnomics offers comprehensive channel economic impact services designed to replace assumption with evidence. Through detailed attribution mapping, ROCI modeling, and enhanced total economic impact analysis, Channelnomics provides executive teams and channel leaders with a clear, defensible understanding of what’s working, where performance is breaking down, and why.
What Channelnomics often finds when working with executive teams and channel leadership is a lack of alignment on what matters most in achieving their goals. Too often, organizations measure the wrong indicators and fail to track critical details around investments and performance outcomes. The result is a stale dashboard of mixed and only marginally relevant datapoints — information that neither tells a complete story nor eliminates the gaps that invite doubt.
The Channelnomics impact analyses go beyond better reporting to enable better decision-making — identifying where incremental investment will generate outsized returns, where incentives are misaligned, and where resources can be redeployed or reduced without sacrificing growth. For organizations under increasing pressure to justify partner spending and prove impact, channel economics is no longer a reporting exercise. It’s a management discipline.
For more information about Channelnomics economic impact services and to schedule a free consultation, send e-mail to info@channelnomics.com.
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Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.