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According to Bob Segal, a Principal withthe channel consulting firm of Frank Lynn & Associates, Inc., manycompanies, especially smaller ones, manage their channel relationshipson an informal, ad hoc basis. Segal suggests that companies develop amore formal, strategic approach to managing their channel partnerships.Conducting a "channel audit" might be a good first step. Smart Business talked to Segal to learn more about this approach.What's wrong with a seat-of-the-pants approach to working with resellers?Obviously,a strong personal relationship with the owner, salespeople and supportpeople at your resellers is a good starting point. However, the natureof the overall relationship is too complex to simply rely onspur-of-the-moment decision-making. Many companies sell throughhundreds of independent channel partners that require sales support,marketing tools, financial programs and technical assistance. Without aformal, detailed plan, the crush of details will overwhelm a supplier.Also,channels are consolidating. Many companies now sell through largeresellers such as Home Depot or Wal-Mart on the consumer/contractorside; big wholesalers such as Ingram or Tech Data in the technologymarket; or large distributors such as Motion Industries, Ferguson orW.W. Grainger in the industrial markets. These huge resellers expectformal, consistent programs.What are some of the major challenges in working with intermediaries?Channelpartners can bring significant market coverage at a relatively lowcost, especially when selling to consumers or small and mid-sizedbusiness customers. Many channels also add technical or logisticsskills beyond the suppliers' capabilities.On the flip side,channels can pose sever several challenges. Simply communicating withso many people can be a problem. Gaining "mindshare" is anotherchallenge.What is a channel audit and how can it help?Manycompanies know their channel sales are below goal or thatintermediaries are complaining about seemingly random problems.However, unless someone undertakes a structured, objective analysis,the company may never uncover the root cause of their channel woes. Wedeveloped a channel audit that looks at more than 30 elements of thesupplier/channel relationship. We do in-depth prep work withour clients. In some cases, we will spend one to two weeks interviewingthe client's channel partners to see what they consider good, bad ormissing in their supplier's program. Then we spend two intensive dayswith the client reviewing channel strategy, channel sales, channelmarketing, organizational and financial aspects of their channelprogram. It is a lot like going to the doctor for an extensive check-up.Mostcompanies will bring together the CEO, the VP of sales, the VP ofmarketing and one or two key channel sales and marketing managers.Often, the CFO will attend as well.What is the typical output of a channel audit?Atthe end, we provide clients with a report card. We rate the importanceof each element and then give each a color-coded (green, yellow, red)performance rating. The ratings take several factors intoconsideration: investment and staffing; use of formal processes, toolsand metrics; the existence or absence of specific channel programs;and, actual sales, share, profit and other performance data.Beyondthe quantitative scorecard, we also provide clients with a qualitativeunderstanding of the score. Our commentary will pinpoint specificissues such as understaffing, lack of training, or over-supportingunder-performing resellers. A channel audit provides a company with aspecific, actionable, measurable set of next steps.After undertaking an audit, what are some of the typical steps a company takes?Oneof the common things we find is suppliers who are overpaying relativeto the functions performed by a reseller or resellers. So thesecompanies will often revise their channel compensation programs with anemphasis on function-based, rather than purely volume-based, criteria.Also,the channel audit often highlights companies trying to sell newproducts or move into new markets by relying on their traditionalchannel partners. Frequently, companies need to sign up new types ofpartners to open up growth areas. Based on this audit finding, manyclients recruit new types of channels that offer better growthopportunities.Companies that have already pursued an aggressivegrowth strategy can run into various types of channel conflicts, as Imentioned earlier. The channel audit will uncover actual and potentialchannel conflicts. We will then work with our clients to develop newpolicies/contracts, compensation, communications or other tactics totamp down the conflict. Article Tags: Channel Audit, Many Companies, Channel Partners, Channel Sales