Using Sabermetrics to Drive Partner Performance

Using Sabermetrics to Drive Partner

Performance

Using Sabermetrics to Drive

Partner PerformanceSanjoy Chatterji

Founder

January 2015

Entomo

Leading provider of turnkey cloud-based channel

management software and services.

We help businesses overcome distribution channel

complexities to maximize revenues, reduce costs, improve

partner performance, and ensure compliance.

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Agenda

• Moneyball and Sabermetrics

• Types of Channel Scorecards

• Channel Maturity Model

• Sample Scorecards

• Final Thoughts and Q&A


Moneyball and Sabermetrics

• Conventional Wisdom

Home Runs

Hits

ERA (Earned Run Average)

• Sabermetrics

OBP (Hits + Walks + HBP)

OPS (OBP + Slugging)

DICE (Defense Independent

Component ERA)

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9

Is Sabermetrics Old News?

You Decide!


10

Is Sabermetrics Old News?

You Decide!

• Even in 2014, brute-force spending did not guarantee

success Top 5 spenders did NOT make it to the World Series

KC Royals spent 1/3rd the top spender (Dodgers) and made it to the Series

SF Giants spent about 2/3rd of the Dodgers and won it all

• Moral of the Story

Spend smart

Look for value, where others are looking for glitz

Don’t spend big bucks on raw high school talent

For better predictability, spend on more polished and refined college

talent


How does any of this apply to the Real

World?


“How Smart Data is Transforming Criminal Justice, Healthcare, Music, and even Government Spending”

-- Anne Milgram

ex-Attorney General of NJJanuary 2014


Talk: The Moneyball Effect

When she became the attorney general, Anne Milgram

discovered a few startling facts:

Her team did not know who they were putting in jail

They had no way of understanding if their decisions were actually

making the public safer!


12

Talk: The Moneyball Effect

Sound Familiar?


13

Channel Sabermetric Example

Gross Margin

= Selling Price to Partner

– COGS


Looks good,

so far!

Is there

anything left?

“Effective” Gross Margin

= Gross Margin

– Ship & Debit/Special Pricing Credits

- Volume Rebates

- Price Protection Credits

- Other Credits (e.g., WHA, Coop/MDF)

- Sales Commissions

Agenda







Basic Partner Performance Scorecard

• Partner Reporting Frequency

• Partner Reporting Timeliness

• Unmatched Reported Part #s

• Customer “match rate” in POS data to some External

Database


16

Intermediate

Partner Performance Scorecard

• Revenue Trend for each partner

• Gross Inventory Trends for each partner

• Sales Against Quota

• Gross Margin for Sales

• “Reach” Expansion in the Channel


17

Channel Sabermetrics (KPIs)

• “Effective” Gross Margin for Sales

• Rollforward Inventory Variance

• “Days on Hand” Scoring

• ROI on Channel Incentive Programs

• Forecast Reliability

• Partner “Reach Revenue”

• Non-Revenue Metrics: CSAT, Training, Certifications, …

• Incentives Based on KPI Scores


Agenda







Channel Maturity Model


Started operations in 2000

Collect POS, Inventory

Implicitly Trust Data from Channel

Match Customers to External Database

Little or no verification of provided data

Basic Scorecard

Initial/Learning

Defined

Collect other types of info: Claims, Forecast, RMA, ...

Manual spot-checks of some data and claims

Match Customers to Internal Database

Provide Channel Incentives to increase sales

Intermediate Scorecard

Optimized

Integrated Channel

Management System

Triangulation and

Automated Verification of

all data: POS, inventory,

claims, …

Commissions and Revenue

Recognition on Reconciled

POS and Validated Back-

end Credits

Opportunity Tracking

Channel Sabermetrics

Using Scorecards to

Incentivize Partners

Evolution of the Scorecard:

You can only Score what you Track

Examples of Optimized Triangulation and Validation

• Match Customer Names to Internal Customer Master

Matching to external vendor-provided database, e.g. D&B, not useful

Need to match to customers who are represented in channel or sales

incentive programs

Or need to match, to see how the channel is really extending “reach”

• Sales in Sales Out (SISO) Reconciliation at Partner/Item level

How do you know that the 500 units reported in the POS was in inventory?

Maintain roll-forward inventory

Determine inventory trends: prevent potential stockouts or writedowns

• POS and Inventory Valuation based on FIFO of Sell-In Invoices

Using Price Book or Reported Price in POS doesn’t account for Broken

Prices

Examples of Optimized Triangulation

and Validation

• 100% Claim Validation

Prevent big source of revenue leaks

• Revalue Transactions after back-end credits to get “Real

Revenue”

Determine real effectivity of distributors

Pay commissions on this value

Recognize revenues on this value

• Program ROI

Revenue uplift

• Design or Deal to Revenue Mapping

Close the loop between Opportunity and Revenues

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Elements Feeding a Scorecard


Poll Question #2


Agenda







Basic Scorecard


• Reporting behavior

• Partner responsiveness

• POS report quality

• Inventory report quality

• Claims report quality

• Sales performance

• Qualitative evaluation

Weight Score

Overall Score = Net revenue

Net credits

Ending inventory

Basic scorecard, plus:

• Revenue & revenue score

• MDF

Incremental revenue

ROI

MDF Leverage Score

• Total bookings and booking score

• Customer satisfaction score & index

• Composite score

Intermediate Scorecard


Channel Sabermetrics


Intermedieate scorecard, plus:

• Distributor Credit Overview Rollforward contribution

Sales accuracy contribution

Day-on-hand (DOH) contribution

Clawbacks & Net Credits

• Distributor Scorecard Beginning & ending inventory

Rollforward performance

Sales accuracy and performance

DOH & DOH deviation

By brand / product family

Agenda







Scorecarding is Like Football

• Just like football needs a multi-dimensional approach

Offense

Defense

Special teams

Defense scoring

Offense defending



• Effective Channel Scorecards also need a multi-pronged strategy

Collect and normalize data

Validate and analyze everything (trust but verify)

Use Channel Sabermetrics to your advantage: Create relevant KPIs

Reward the behavior you want to encourage



• Case in point: Seattle Seahawks, 2015 NFC Champions

Offense: Stunk

Defense: Solid

Special teams: Stellar

Still won, because they had a

multi-dimensional strategy


Final Thoughts


Final Thoughts

• Scorecards can be used to mold partner behavior

• Ensure that the data you feed into the scorecard is valid

(Garbage in Garbage Out)

• Scorecards, while useful, need careful planning and design

• Identify where you are on the Channel Maturity Model

continuum and design accordingly

• Walk before you run

• Ensure you have access to appropriate technology and business

practice expertise


Q & A

Please type in your questions using the “Questions” box …

Post-webinar questions can be sent to:

[email protected]

- or -

425-372-0544

www.entomo.com


http://www.entomo.com/

Using Sabermetrics to Drive Partner Performance

Software

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external database proprietary

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sabermetrics old news

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