Channel Business Index Offers Insight

Traditionally, technology has been an economic bellwether and the channel offers great insight on the sentiment of the SMB. As a result, CRN is unveiling a new business index to get a real-world view of solution provider confidence and business outlook in the channel.

Called the Channel Business Index (CBI), this confidence number is modeled on the Institute for Supply Management’s (ISM) Non-Manufacturing Index (NMI), a well-accepted and reliable economic indication of the health of the services market. The CBI will represent those that sell to the small, medium and enterprise business markets, and CRN will go to the same panel of solution providers each month and ask them to assess their organization’s performance comparing the current month to the previous month. A reading above 50 percent indicates that the market is generally expanding while a number below 50 percent indicates that the sector is generally contracting.

This year we have been quietly building data for this index. The good news is business activity, sales or new orders have all registered strong numbers and were higher than the national average. Employment was the lowest number and appeared to be contracting slightly, indicating that the channel is still reticent to hire new employees or fill vacant positions. As we gather more data, we will be able to offer additional metrics and trending on production, customer inventories, new orders, prices, employment, backlog of orders, supplier deliveries and inventories. Stay tuned for more data and analysis around the CBI in 2012 both in print and online.

While the economy is sputtering and cost cutting appears to be the most common reaction, a recent study challenges that conventional wisdom. Rather, those that can transform how they sell, see the biggest improvements in sales and profits, according to ZS Associates and the Aberdeen Group.

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Instead of selling on products and services or even relationships and price, these companies are tailoring their offerings to customer needs and the value delivered. Because buyers today are more sophisticated and product information is readily available on the Web, a salesperson’s role must be focused on value, and they must have a deeper level of insight into customers’ priorities. It is all about understanding your customers’ problems and solving those problems.

According to the study, “best-inclass” companies had 91 percent customer retention rates, an 11.7 percent year-over-year increase in annual contract or average deal size, and an average year-over-year profit growth rate of at least 16 percent. Meanwhile, “industry average” companies saw 42 percent customer retention rates, a 1.7 percent year-over-year increase in annual contract or average deal size, and an average year-over-year profit growth rate of 1.8 percent. Lastly, “laggard” companies had 31 percent customer retention rates, a 3.7 percent year-over-year decrease in annual contract or average deal size, and an average 1.9 percent decrease in overall year-over-year company profits.

So the marching orders for 2012 are to get to know your customer even better than in 2011. And here’s to some consistent economic results and growth for the channel in the future.

BACKTALK: Kelley Damore is VP, Editorial Director for UBM Channel. You can reach her via e-mail at [email protected].