Retailers analyze customer data for sales insights, but such data is largely invisible to OEMs. The emerging discipline of channel data management hopes to change that.
Channel data management is a relatively new discipline that is starting to catch on in tech and some other industries because of OEM companies' desire for better insight into sales. The idea is to track sales all the way down to the end customer, providing better pipeline accuracy.
Despite the growing concentration on customer data and its importance in driving sales and growth, much of that information is unavailable today to product manufacturers, according to experts in the emerging field of channel data management.
While a company selling directly to consumers has access to large amounts of sales data, including products sold, location of customers and similar information, this type of data is largely invisible to tech companies, manufacturers and others who sell through a supply chain – selling to a wholesaler, big box store or other type of distributor, who then sells to the consumer.
Indirect Sales and Invisible Data
Indirect selling accounts for some 60 percent of all sales in the U.S. and a higher percentage overseas, according to Andrew Thomas, professor of marketing and international business activity at the University of Akron and co-author of The Distribution Trap: How to Avoid the Biggest Mistake in Business.
Some industries with franchised operations have solved this issue by requiring franchisees to use specific sales management/inventory systems that product manufacturers can delve into to garner any supply chain information they desire.
But most companies have insight only into the first level of these sales, Thomas said. For example, an electronics manufacturer would typically have insights on sales to Best Buy or another big box store, but not insight into sales in particular regions or data on unsold inventory. Better insight would mean better business and an improved supply chain.
Best Buy, Wal-Mart and other big retailers may have this detail, but they often don’t want to share it upstream. The issue comes down to who owns the data. While OEM companies want this insight, supply chain partners tend to see the data as their own. This issue becomes even more complicated overseas, where there are often more levels of sales channels than in the U.S., according to Thomas.
"The idea has been that the customer [in this case, the first-level buyer of the product, not the consumer or other end customer] is in charge. The information is in the hands of the mega-customers," he said, noting that mega customers include any buyer who represents 10 percent or more of the company sales.
Improving the Supply Chain
Cypress Consulting estimates that improvements in pipeline accuracy could increase sales by as much as 5 percent, noting that channel data management can improve incentive payouts, revenue recognition, sales forecasting, marketing programs and supply chain planning.
"Without complete and accurate channel data feeding these systems, vendors are forced to make critical decisions based on inadequate analysis," Cypress Consulting wrote in its IT Systems for Channel Management report in January. "And while partners are usually obligated to provide accurate reports, they often fail to meet this requirement."
Channel data management emerged in the technology industry in the last couple of years and still has a long way to go there and in other industries, according to Thomas.
What Channel Data Management Can Do
According to Forrester, a comprehensive channel data management solution needs to automate data reporting between channel partners though electronic data interchange (EDI), AS2 and secure file transfer protocol (SFTP). Sophisticated algorithms match partner names to databases, to reduce inconsistencies between the OEM’s identification of a product and the product name on a point-of-sale transaction receipt.
The channel data management solution’s analytics need to track sales, inventor, product/store-level performance and country-level performance. A comprehensive channel data management solution will also properly match incentive pay/discounts.
The incentive pay/discounts element is an important aspect of the supply chain, according to Chandran Sankaran, founder and CEO of Zyme, one of four companies that provide 20 percent of data management solutions in the tech industry, according to Forrester, which points out that many tech companies have proprietary solutions. The other firms are Channelinsight, Computer Market Research and Entomo.
Incentives/discounts represent about 15 percent of the $4 trillion in tech sales, according to Sankaran. But lacking visibility into end-customer sales, OEM companies don’t have the insight needed to provide marketing support where it will boost sales the most, to determine when to cut back on production because inventory isn’t moving, and to make similar business decisions designed to help the OEM as well as the channel partners.
"We’re just at the beginning of this," said Thomas, who sees government contracting as a huge, untapped opportunity for channel data management. "At a high level, it will take a long time. Tech is leading the way. Consumer goods will be the last battle."
Phillip J. Britt's work has appeared on technology, financial services and business websites and publications including BAI, Telephony, Connected Planet, Independent Banker, insideARM.com, Bank Systems & Technology, Mobile Marketing & Technology, Loyalty 360, CRM Magazine, KM World and Information Today.