Channel Business Index Offers Insight

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One thing is certain: We are still operating
amid economic uncertainty. From the European
debt crisis to the unemployment number
remaining steady, the healthy and predictable
turnaround is still out of our reach.

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.

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

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