Chapter 3

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

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Motivating the Channel Members

The actions taken by the manufacturers to

1. Findout the needs and problems of

Approaches for learning about member

1. Research studies of channel members

Less than 1 percent of manufacturers’ research

Manufacturer-initiated research can be

Why use outside parties to conduct research?

They provide a higher They provide a level

Focus of channel manager’s approach:

• Gather data on how channel members

• Locate the strengths and weaknesses

• Learn what is expected of manufacturers

What makes marketing channel audits most effective?

What are the benefits?

• Provides recognition for the channel members

Intermittent interactions between manufacturer

Partnerships & Strategic Alliances

Continuing & mutually supportive relationship

Deals with virtually all aspects of the

- Focuses on channel member needs & problems

- Simple & straightforward

- Conveys a clear sense of mutual benefit

Typical types of cooperative programs

• Cooperative advertising allowances

Focus on a continuing and mutually

Three basic phases

1. Manufacturer should make explicit statement of

2. Manufacturer should assess all existing distributors

3. Manufacturer should continually appraise the

Term Coined by McComman

A comprehensive set of policies for the promotion

Developed as a joint effort between the

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

1. Analysis of marketing objectives & the kinds of

2. Formulate specific channel policies that offer:

Three Phases of Channel Performance

1. Developing evaluation criteria

2. Periodically evaluating the

3. Recommending corrective actions

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*

Criteria channel manager

Comparisons of the Comparisons of the

Key Criteria for evaluating member inventory performance:

Technical knowledge and competence

Channel manager should consider

Key issues for evaluating channel

Three 2. Multiple criteria combined informally

3. Multiple criteria combined formally

Commonly used when the number of channel

Managerial judgment used