We’ve all heard the buzzword: “ROI” or Return on Investment. It’s in every business’s vocabulary, and it makes sense why: We need metrics to forecast value and help us make informed decisions for our teams and budgets.
The challenge is that it doesn’t always paint a full picture.
Calculating a true ROI can feel elusive and even misleading when it comes to channel incentive programs. Is ROI just marketing jargon or a meaningful metric? Is revenue the only return worth measuring?
The Pitfalls of “ROI”
When we track returns on investments, the goal is to assess the positive impact of a product, service, department, team or partnership: Is the output worth the input?
While ROI is a starting point for the conversation, it’s not a tell-all for prescribing value. Here’s why:
Intangible Benefits Are Harder to Trace
ROI often focuses on measuring hard numbers like sales dollars. However, channel programs can offer valuable, intangible business benefits that are difficult to quantify, like increased brand awareness, improved partner or customer relationships, or access to new markets. Attributing a dollar value to these outcomes can be challenging
Restricted Timelines May Conflict with Goals
ROI calculations typically zero in on a specific timeframe, but the impact of channel programs can unfold over a much longer period. Building strong partner relationships takes time, as does establishing brand loyalty. If you’re focused on building long-term loyalty, that metric can conflict with short-term sales goals.
External & Competing Factors Create Friction
External factors like economic conditions, competitor activity, and industry trends can all impact sales figures. Disentangling the program’s effect from these external factors can be difficult, leading to a potentially misleading ROI calculation.
Giving Credit Can Get Complicated
When a customer makes a purchase influenced by multiple channels, attributing it to the right channel incentive program can be tricky. It’s not always easy to isolate the program’s specific contribution to the sale.
How To Measure the Tangible Impact of Channel Programs & Investments
We need to go further than a single ROI number to gain an accurate snapshot of program performance and output. A truly comprehensive approach requires intentional steps to capture all aspects of program success:
Measure Metrics that Matter
Program performance can’t just be summed up by sales numbers. Countless quantifiable actions contribute to program success. The key is to track and measure any behaviors that align with your program’s specific goals, including both early-stage and mature program objectives:
- New program objectives might include driving program registrations, increasing recruitment numbers, ensuring the completion of training or growing order volumes.
- More mature programs might focus on increasing year-over-year growth, advancing product breadth, improving customer retention rates, or increasing cross-sells and upsells
Isolate All Variables – And Test
Imagine dissecting a watch to understand which gears have the greatest effect on movement. That’s the approach you’ll want to take to find out what’s working within your channels.
It helps to break the program down into the most measurable components, such as tier structures, incentive spending, communication frequency and more. By testing and measuring each element individually, we can isolate the most impactful levers that drive program success.
Continuously Optimize
The best programs are never static. It’s crucial to leverage the insights from ongoing measurements to strategically optimize your program as you go.
Successful tests become permanent fixtures, and you’ll need to continually measure to identify the next area for improvement. This iterative process ensures your program stays relevant and can remain flexible as market conditions and partner needs evolve.
The Next Step Beyond ROI
Measuring just one figure or aspect of your program doesn’t capture its total value, and it doesn’t give you answers to perfect your strategies either. To fully understand your program’s effectiveness, consider what you want to gain from measuring ROI. If you need clarity about how your channels impact your business, a comprehensive approach can provide that and more.
Consider intangible benefits, maintain a long-term focus and test important variables. While your ROI-obsessed competitors measure what they can see, you broaden the scope of value for your program beyond what meets the eye, and you gain optimizations that others are bound to overlook.
So, let’s take the next step and measure the metrics that matter. But what are they? Check out our guide to learn the specific program and partner metrics you should track to reveal all aspects of channel performance.
Click here to read Metrics That Matter: Measuring Program Success (Part Two).