Term
| Four major Factors Affecting Scope and Frequency of Channel Member Evaluations |
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Definition
1. Degree of the manufacturer’s control over the channel members
2. Relative importance of the channel members
3. Nature of the product
4. Number of channel members |
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Term
| Degree of the manufacturer’s control over the channel members |
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Definition
| This plays a major role in determining the scope and frequency of its evaluations. The more control the manufacturer has, the easier it will be to perform evaluations. The less control the manufacturer has, the more difficult it will be. |
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Term
| Relative importance of the channel members |
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Definition
| The manufacturer who sells all of its output through intermediaries is likely to evaluate its channel members more comprehensively, because the firm’s success is so directly dependent upon the channel members’ performance. A manufacturer who primarily markets its products through its own company-owned retail stores and only uses independents for a small portion of its sales may only perform cursory evaluations of these dealers. |
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Term
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Definition
| The more complex the product is, the broader the scope of evaluation, and vice-versa. |
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Term
| Number of channel members |
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Definition
| The manufacturer using “intensive distribution,” or many channel members, may find it necessary to use an “evaluation by exception” process. Manufacturers using highly selective distribution find that their close working relationships with channel members gives them access to a broad range of data, enabling them to conduct very comprehensive performance evaluations. |
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Term
| Day-to-day monitoring of the performance of channel members |
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Definition
| This is based almost exclusively on sales criteria. Billing of sales to the channel members, reflected in standard sales analysis reports (such as from scanner data) can furnish the basic information needed for this kind of evaluation. |
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Term
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Definition
| This involves a number of other criteria besides sales. This is called the Channel Member Performance Audit. |
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Term
| Channel Member Performance Audit |
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Definition
| This is a periodic and comprehensive review of channel member performance. The frequency of the audit varies, but seldom is it done more frequently than once per year per channel member. |
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Term
| The Channel Member Performance Audit consists of three basic phases: |
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Definition
1. Developing criteria for measuring channel member performance
2. Periodically evaluating the channel members’ performance against the criteria to measure performance
3. Recommending corrective actions to reduce the number of inadequate performances. |
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Term
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Definition
| Most manufacturers use a combination of the following: sales performance of channel members, inventory maintained by channel members, selling capabilities, attitudes of members, competition faced by members, and general growth prospects of channel members. |
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Term
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Definition
| This is the most important and commonly used criterion for evaluating channel members. The channel manager should be careful to distinguish between (1) the sales of the manufacturer to the channel member, and (2) the channel member’s sales of the manufacturer’s products to the channel member’s customers. The manufacturer’s ability to gather the data depends upon the degree of control that the manufacturer has over the channel member. Sales data should be evaluated in terms of (1) comparisons of the channel member’s current sales to historical sales, (2) cross comparisons of a member’s sales with those of other channel members, and (3) comparisons of the channel member’s sales with predetermined quotas (if quotas were assigned). |
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Term
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Definition
| Manufacturers want channel members to live up to the stocking requirements specified in the original agreement between the manufacturer and the channel member. If the manufacturer puts a great deal of weight on inventory maintenance as a criterion of channel member performance, an attempt should be made to include this n a formal agreement with the prospective channel member during the selection phase of channel design. |
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Term
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Definition
| Many manufacturers believe it to be worthwhile to evaluate channel members’ sales capabilities more directly by appraising their salespeople. Particularly true of channel members at the wholesale level. If the information is available, the manufacturer should pay particular attention to such factors as (1) the number of salespeople the channel member assigns to the manufacturer’s product line, (2) the technical knowledge and competence of the channel member’s salespeople, and (3) salesperson interest in the manufacturer’s products. |
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Term
| Attitudes of Channel Members |
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Definition
| This should be evaluated independently of sales data. |
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Term
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Definition
| The channel manager should consider 2 types of competition: (1) competition from other intermediaries, and (2) competition from other product lines carried by the manufacturer’s own channel members. This evaluation serves 2 purposes: (1) It helps to put the channel member’s performance in perspective, by seeing how a particular member stacks up against the competition, and (2) comparative information can be very useful in the event that the manufacturer decides to expand coverage by adding new channel members, or if it becomes necessary to replace existing ones. |
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Term
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Definition
| Financial status of channel members (normally considered carefully in the selection of channel members), their character and reputation (determined by talking with some of their customers), and the quality of service offered by channel members to their customers (reflected ultimately in their sales performance). |
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Term
| Applying Performance Criteria |
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Definition
| Three approaches are generally used: (1) separate performance evaluations on one or more criteria, (2) multiple criteria combined informally to evaluate overall performance qualitatively, or (3) multiple criteria combined formally to arrive at a quantitative index of overall performance. |
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Term
| Separate Performance Evaluations |
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Definition
| Most commonly used when the number of channel members is very large and when the criteria employed are limited to no more than those of sales performance, inventory maintenance and possible selling capabilities. This approach is simple and fast, once the data has been gathered. Significant disadvantage: offers little insight into overall performance. |
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Term
| Multiple Criteria Combined Informally |
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Definition
| An attempt is made to combine the various criteria into an overall judgment about channel member performance. The combining is done only n an informal and qualitative manner; that is, the relative importance or weights assigned to each of the performance measures are not made explicit and no formal quantitative index of overall performance is computed. Major advantages are its simplicity and flexibility. Three major problems with this approach: First, trade-offs in performance ratings. Ratings can be arbitrary. Second, the problem of making performance comparisons among channel members. Third, this approach still does not offer a single quantitative index reflecting overall performance. |
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Term
| Multiple Criteria Combined Formally – This approach consists of 5 steps: |
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Definition
A formal rating system using multiple criteria enables the channel manager to arrive at an overall quantitative performance rating for each channel member. This approach consists of 5 steps:
1. Criteria and associated operational measures are decided on
2. Weights are assigned to each of the criteria to reflect their relative importance
3. Each channel member being evaluated is then rated on each of the criteria on a scale of 0 to 10.
4. The score on each criterion is multiplied by the weight for that criterion. This yields weighted criterion ratings.
5. The weighted criterion ratings are summed to yield the overall performance rating (index) for each channel member. |
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Term
| Recommending Corrective Action |
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Definition
| In general, manufacturers should try to recommend corrective actions to improve the performance of channel members who are not meeting minimum performance standards. If corrective actions are contemplated, aimed at rehabilitation rather than termination, the channel manager should attempt to find out why these channel members have performed poorly. Special effort must be made to learn about the needs and problems of poorly performing channel members to pinpoint the reasons for failure. To find out what is going on, the channel manager must (1) develop concrete and practical approaches aimed at actively seeking information on channel member needs and problems. (2) Programs of channel member support must be congruent with channel member needs and problems. (3) The manufacturer must exercise leadership through the skillful use of power. (4) The constraints imposed by the interorganizational setting of the marketing channel (Chapter 9) must be understood if the channel manager expects to achieve a positive channel member response to the rehabilitation program. |
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