Getting Multi-Channel Distribution Right

CHAPTER 8What Are You Managing Towards?*: Distribution Performance Metrics

8.1 INTRODUCTION

“You cannot manage what you cannot measure” is one of the oldest clichés in management, and it's either false or meaningless. It's false in that companies have always managed things—people, morale, strategy, etc.—that are essentially unmeasured. It's meaningless in the sense that everything in business—including people, morale, strategy, etc.—eventually shows up in someone's ledger of costs or revenues.

—Thomas A. Stewart¹

In the spirit of Tom Stewart's comment that everything eventually shows up in the top and bottom lines, growth in revenue, margin, and Economic Value Added may be the ultimate indicators of successful distribution management just as they are of channel power. We believe, however, that there is an important role for intermediate as well as more granular indicators that diagnose whether distribution strategy is on the right path. Recall from the framework we introduced at the beginning of the previous chapter that metrics for distribution performance should measure both how well the supplier and its brand(s) perform for the retailer and how well the retailer performs for the supplier and its brand(s).

Before serving up a generous helping of the alphabet soup of performance metrics, let's summarize what is old but still worth reviewing, and what is new(er). Absolutely ancient is the difference between dollar and percentage metrics. Though “per centum” dates back to ...