Chapter 3

Motivating the Channel Members

 Channel Motivation

The actions taken by the manufacturers to

foster channel member cooperation in
implementing the manufacturer’s
distribution objectives  Beyond Compliance
Active Representation of Your Products!
 Motivating Channel Members
Basic Framework

1. Findout the needs and problems of

channel members.
2.Offer support to the channel
members that matches with their
needs and problems.
3.Provide leadership through the
effective use of power.
 II. Finding Out Channel Member
Needs & Problems

Approaches for learning about member

needs & problems*:

1. Research studies of channel members

2. Research studies by outside parties
3. Marketing channel audits
4. Distributor advisory councils
+ Feedback from Your Salesforce
 1. Research Studies of Channel
Members

Less than 1 percent of manufacturers’ research

budgets is spent on channel member research!

BUT:

Manufacturer-initiated research can be

useful because certain types of needs or
problems may not be at all obvious.
 2. Research Studies by Outside Parties

Why use outside parties to conduct research?

They provide a higher They provide a level

assurance of objectivity. of expertise that the
manufacturer may not
possess.
 3. Marketing Channel Audits*

Focus of channel manager’s approach:

• Gather data on how channel members

perceive the manufacturer’s marketing
program and its component parts.

• Locate the strengths and weaknesses

in the relationships.

• Learn what is expected of manufacturers

to make the channel relationship viable
and optimal.
 Marketing Channel Audits

What makes marketing channel audits most effective?

It should It must
identify and define be conducted
in detail the issues periodically so
relevant to the as to capture
manufacturer- trends &
reseller Issues chosen for patterns.
relationship. the audit should be
cross-referenced to
any relevant
variables.
 4. Distributor Advisory Councils

Who is involved?
Top management representatives from the
manufacturer and from the channel members

What are the benefits?

• Provides recognition for the channel members

• Provides a vehicle for identifying and discussing
mutual needs and problems
• Results in an overall improvement of channel
communications
III. Means to Motivate Channel Members*

3 Types
of
1. Cooperative Channel
Arrangements Programs

2. Partnership or
strategic alliance

3. Distribution
programming
Cooperative Arrangements

Intermittent interactions between manufacturer

& channel members

Partnerships & Strategic Alliances

Continuing & mutually supportive relationship

Distribution Programming

Deals with virtually all aspects of the

channel relationship
 1. Cooperative Arrangements

- Focuses on channel member needs & problems

- Simple & straightforward

- Conveys a clear sense of mutual benefit

 Cooperative Arrangements

Typical types of cooperative programs

provided by Manufacturers to channel members

• Cooperative advertising allowances

• Payments for interior displays
• Contests for buyers, salespeople, etc.
• Allowances for warehousing functions
• Payments for window display space
• Demonstrators
• Coupon-handling allowance
• Free goods
 2. Partnerships & Strategic Alliances*

Focus on a continuing and mutually

supportive relationship between the
manufacturer and its channel members
* Mainly For An Elite Group of Distributors
 Partnerships & Strategic Alliances

Three basic phases

1. Manufacturer should make explicit statement of

policies in areas such as product availability,
technical support, pricing, etc.

2. Manufacturer should assess all existing distributors

as to their capabilities for fulfilling their roles

3. Manufacturer should continually appraise the

appropriateness of the policies guiding his
or her relationship with the channel members
M-Pesa
 3. Distribution Programming*

Term Coined by McComman

A comprehensive set of policies for the promotion

of a product through the channel

Developed as a joint effort between the

manufacturer and the channel members
to incorporate the needs of both

• (Exclusive) Dealership or Franchise System : Mc Donalds, Holiday Inn

 Distribution Programming
Steps for developing a program:

1. Analysis of marketing objectives & the kinds of

levels of support needed from channel members
• Ascertains channel members’ needs &
problem areas

2. Formulate specific channel policies that offer:

• Price concessions to channel members
• Financial assistance
• Some kind of protection for channel members
Providing Leadership to Motivate
Channel Members
• Control must be exercised through effective
leadership on a continuing basis to attain a
well motivated team of channel members.

• E.g.Cisco
EVALUATING THE CHANNEL
MEMBER PERFORMANCE
• http://www.bgr.in/news/samsung-and-
xiaomi-battle-it-out-for-consumer-and-
distributor-adoption/
PERFORMANCE EVALUATION Vs
Day to Day Monitoring
 Pegram identified two basic types of evaluation
approaches:
 Appraisals designed to assist management in
maintaining current operating control of distributors’
efforts, insofar as the sale of the company’s product is
concerned
 Overall performance reviews designed to give
management a complete and, hopefully, objective
analysis of each distributor’s operations
 Channel Performance Audit 14

Three Phases of Channel Performance

Audit

1. Developing evaluation criteria

Channel goals

2. Periodically evaluating the

performance against the criteria

3. Recommending corrective actions

 I. Key Criteria for 14

Channel Performance Audit*

• Sales performance of channel members

• Inventory maintenance of channel members*

• Selling/Service capabilities of channel members*

• Attitudes of channel members

• Competition faced by channel members*

• General growth prospects of channel members*

 1. Sales Performance 14

Criteria channel manager

should use to evaluate sales data:

1. 3.

Comparisons of the Comparisons of the

channel member’s current channel member’s sales
sales to historical sales with predetermined quotas

2.

Cross comparisons of
a member’s sales with
those of other members
 2. Inventory Maintenance
14

Key Criteria for evaluating member inventory performance:

1. Total level of channel member’s inventory
2. Shelf or floor space devoted to inventory
3. Shelf or floor space relative to competitors’
inventory
4. Breakdown by particular products in units & dollars
5. Comparison of figures with channel members’
estimated purchases of related & competitive lines
6. Condition of inventory & inventory facilities
7. Amount of old stock & efforts made to move it
8. Adequacy of channel member’s inventory control &
record-keeping system
 3. Selling Capabilities 14

Ex) CISCO
Manufacturer who obtains sales records
for channel members’ salespeople should
examine the following factors:

1.
3.
Number of salespeople
the channel member Salesperson interest
assigns to manufacturer’s in manufacturer’s products
product line
2.

Technical knowledge and competence

of channel member’s salespeople
 4. Attitudes of Channel Members 4

Attitudes

Not usually
evaluated unless Negative ones often addressed
sales performance after they have contributed
is unsatisfactory to poor performance

Should be evaluated
independently of sales data
 5. Competition
14

Channel manager should consider

two types of competition:

1.
2.
Competition from other
Intermediaries Competition from
(Inter-store) other product lines
carried by the
manufacturer’s own
channel members
 6. General Growth Prospects 1
4

Key issues for evaluating channel

member growth prospects:

1. Past performance
2. Overall performance
3. Expansion or improvement of organization
4. Level of growth and qualification in personnel
5. Management, age, health, or succession
arrangements
6. Adaptability & overall capacity to meet market
expansions
 14
II. Applying Evaluation Criteria

1. Separate performance
evaluations on one or more criteria

Three 2. Multiple criteria combined informally

Approaches to evaluate overall performance
qualitatively

3. Multiple criteria combined formally

to arrive at a quantitative index of
overall performance
1. Separate Performance Evaluations 14

Commonly used when the number of channel

members is very large & when criteria are
limited to no more than sales performance,
inventory maintenance, & possible selling
capabilities
2. Multiple Criteria Combined Informally 14

Operational performance
measures obtained

Managerial judgment used

to combine performance measures

Qualitative judgment made about

overall channel member performance
3. Multiple Criteria Combined Formally 14

5 Steps
1. Criteria & associated operational measures are decided on

2. Weights assigned to each of the criteria

3. Each member evaluated is rated on each of the criteria

4. Score on each criterion multiplied by weight for that criterion

5. Weighted criterion ratings summed to yield overall

performance rating for each member
 14
III. Recommending Corrective Actions

Channel manager should attempt to

find out why members have performed poorly
 Correction and enforcement

1. Develop concrete & practical approaches to actively

seek information on member needs and problems

2. Programs of member support must be congruent* with

member needs & problems

3. Constraints imposed by interorganizational setting of

marketing channel must be understood