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Navigating the Increasing Complexity of Channel Marketing in the Digital Age

Clarke Smith Written by: Clarke Smith

For decades, brands that sell through networks of distributors, dealers and independent sales representatives have relied on channel marketing programs to help drive sales and create consistency in pricing and messaging. Yet today, program managers face more rapid, significant change than any time in the past.Channel marketing programs range from simple SPIFs – or sales performance incentive funds that provide local affiliates with a specific bonus for selling a particular product – to co-op programs using complex, sales-based calculations to allocate dollars to support affiliate sales and marketing activities.

Brands invest more than $50 billion annually in channel marketing programs, and for many, the tools used to manage their programs (spreadsheets and ledgers) can no longer keep up with the rapid pace of change in their marketing and distribution models.

Co-op programs designed to support traditional retail distribution are challenged by the shift to online sales via dealer websites and marketplaces and widespread chang

es in the overall marketing landscape. As dealers move dollars to geo-targeted search from weekly newspaper ads, this often leaves both brands and local dealers struggling to decide how to apply program rules.

A growing number of our clients are using channel marketing programs to change dealer behavior by shifting reimbursement levels, cutting (or eliminating) reimbursements for promotional items (e.g., pens and mugs) and offering 100 percent reimbursement for dealer website setup and hosting. Other clients have created complex tiers that reimburse traditional marketing materials that include local website URLs at a significantly higher percentage than those that don’t.

While reimbursement rates tell part of the story, the trends in channel program spending by media type paint a clear picture of the rapidly changing landscape:

 

These numbers – based on the $2 billion in channel marketing funds Brandmuscle manages – illustrate an ongoing decline in traditional media support. While newspaper captures the largest share of dollars, it continues to decline as investments shift to paid local search and web hosting, neither of which were measurable just five years ago.

Local affiliates tend to lag two to three years behind brands in their adoption of digital marketing tactics, but the shift is underway – and channel program managers are playing a key role in driving and supporting that shift. In particular, there are three key trends we see across our clients:

  1. Shift to web-based program management tools: Many global brands with complex channel marketing programs made the shift to web-based tools in the early 2000’s, but we see a marked increase in the number of smaller brands/programs moving to web-based tools since 2011. Many of these programs have been managed by an individual with a spreadsheet who can no longer keep up with the variety and complexity of program options or the demands/needs of their local affiliates.
  1. More complex/flexible reimbursement models: As the number of channels and marketing options increases, program managers are realizing that ongoing programs like local search require a very different set of rules and documentation than a Yellow Pages listing and are implementing more complex rules. Web-based channel marketing management tools that support varied and complex reimbursement calculations streamline this process and enable ongoing fine tuning to program rules and reimbursement rates.
  1. Balancing reimbursement with compliance monitoring: The rise in low-cost, flexible, local websites, social media and online marketplaces creates a unique challenge as low costs make reimbursement less critical, and give local affiliates more flexibility in delivering their message. Several clients are addressing these areas by focusing on compliance monitoring rather than reimbursement to enforce brand standards. One client has moved to a 100 percent compliance-based model that required the development of tools to provide ongoing monitoring of affiliate websites and social media feeds to ensure program and pricing compliance.

Channel programs will continue to play an important role in driving affiliate sales and brand consistency, but marketing’s rapid pace of change will force program managers to make important changes. Channel fund managers will adjust program rules and reimbursement rates to fit an evolving marketing ecosystem, and they will adopt program management tools that are designed to support the increasing complexities.

Is your co-op or channel funding program becoming more complex? What adjustments have you made? Let us know in the comments below.

For more information about the $2 billion of co-op funding we track for our clients, along with insights from local marketing affiliates, download Brandmuscle's 2014 State of Local Marketing Report or contact us for more info.

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