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Chapter 14

Evaluating Channel Member


Performance

Objective1:

Evaluating Member
Performance

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The importance of channel member performance


equals that of employee evaluations within the firm.
Except

1.
1. The
Thechannel
channelmanager
managerworks
workswith
withindividual
individualfirms
firms
rather
ratherthan
thanwith
withindividual
individualemployees.
employees.
2.
2. The
Thesetting
settingisisinterorganizational
interorganizationalrather
ratherthan
than
intraorganizational.
intraorganizational.

Objective2:

Scope & Frequency


of Evaluations

1.
1.Degree
Degreeof
ofthe
themanufacturers
manufacturerscontrol
controlover
over
channel
channelmembers
members
2.
2.Relative
Relativeimportance
importanceof
ofchannel
channelmembers
members
3.
3.Nature
Natureof
ofthe
theproduct
product
4.
4.Number
Numberof
ofchannel
channelmembers
members

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Degree of Control
Control
Controlthat
thataaproducer,
producer,
manufacturer,
manufacturer,or
orfranchisor
franchisorhas
has
over
overmembers
membersisisbased
basedon
on
strong
strongcontractual
contractualagreements
agreements

Channel
Channelmanager
manager
can
candemand
demandaagreat
greatdeal
dealof
of
information
informationon
onmember
member
operations
operations

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Manufacturer
Manufacturerlacks
lacks
strong
strongmarket
marketacceptance
acceptance
for
forits
itsproducts
products&&strong
strong
channel
channelcontrol
controlbased
basedon
on
contractual
contractualcommitments
commitments

Manufacturer
Manufacturer
can
canexert
exertlittle
little control
control
over
overchannel
channelmembers
members

Importance of Channel Members

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Evaluation
Evaluationof
ofchannel
channelmembers
membersisismore
more
comprehensive
comprehensivefor
formanufacturers
manufacturerswho
whosell
sellall
allof
oftheir
their
output
outputthrough
throughintermediaries
intermediariesthan
thanfor
formanufacturers
manufacturers
who
whorely
relyless
lesson
onintermediaries.
intermediaries.
Why?

Because
Because the
the firms
firms success
success in
in the
the market
market is
is directly
directly
dependent
dependent on
on the
the channel
channel members
members performance
performance

Nature of the Product


The
Themore
morecomplex
complexthe
theproduct,
product,
the
thebroader
broaderthe
thescope
scopeof
ofevaluation
evaluation

+
For
Forproducts
productsof
ofvery
veryhigh
highunit
unitvalue,
value,the
the
gain
gainor
orloss
lossof
ofaasingle
singleorder
orderisis
important
importantto
tothe
themanufacturer
manufacturer

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Number of Channel Members


Manufacturers
Manufacturerswho
whouse
use
intensive
intensivedistribution
distribution

Channel
Channel member
member
evaluation
evaluation may
may
be
be cursory
cursory

Manufacturers
Manufacturerswho
whouse
use
highly
highlyselective
selective
distribution
distribution

Channel
Channelmember
member
evaluation
evaluationisis
comprehensive
comprehensive

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Objective3:

Evaluation versus Monitoring

Performance
Evaluation

Overall performance
reviews that give
management a complete
& objective analysis of
each distributors
operations

Day-to-Day
Monitoring

Appraisals that assist


management in
maintaining current
operating control of
distributors efforts

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Objective4:

Performance Audit

Three Phases
1. Developing criteria for measuring channel
member performance
2. Periodically evaluating the channel members
performance against the criteria
3. Recommending corrective actions to reduce the
number of inadequate performances

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Objective5:

Key Criteria for


Performance Audit
Sales performance of channel members

Inventory maintenance of channel members


Selling capabilities of channel members
Attitudes of channel members
Competition faced by channel members
General growth prospects of channel members

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Sales Performance
Criteria channel manager
should use to evaluate sales data:

1.

3.

Comparisons of the
channel members current
sales to historical sales

Comparisons of the
channel members sales
with predetermined quotas
2.

Cross comparisons of
a members sales with
those of other members

Inventory Maintenance
Key Criteria for evaluating member inventory performance:
1. Total level of channel members inventory
2. Shelf or floor space devoted to inventory
3. Shelf or floor space provided 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 on hand & efforts made to move it
8. Adequacy of channel members inventory control &
record-keeping system

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Selling Capabilities
Manufacturer who obtains sales records
for channel members salespeople should
examine the following factors:
1.

3.

Number of salespeople
the channel member
assigns to manufacturers
product line

Salesperson interest
in manufacturers products
2.

Technical knowledge and competence


of channel members salespeople

Attitudes of Channel Members

Attitudes
Not usually
evaluated unless
sales performance
is unsatisfactory

Negative ones often addressed


after they have contributed
to poor performance

Should be evaluated
independently of sales data

Competition

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Channel manager should consider


two types of competition:

1.

2.

Competition from other


intermediaries

Competition from
other product lines
carried by the
manufacturers own
channel members

General Growth Prospects


Key issues for evaluating channel
member growth prospects:
1.
2.
3.
4.
5.

Past performance
Overall performance
Expansion or improvement of organization
Level of growth and qualification in personnel
Management, age, health, or succession
arrangements
6. Adaptability & overall capacity to meet market
expansions
7. Members estimates of its own medium- & long-range
outlooks

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Objective6:

Applying Performance Criteria


1. Separate performance
evaluations on one or more criteria

Three
Approaches

2. Multiple criteria combined informally


to evaluate overall performance
qualitatively

3. Multiple criteria combined formally


to arrive at a quantitative index of
overall performance

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Separate Performance Evaluations

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

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Multiple Criteria Combined Informally


Operational performance
measures obtained

Managerial judgment used


to combine performance measures

Qualitative judgment made about


overall channel member performance

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Multiple Criteria Combined Formally

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

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Objective7:

Recommending
Corrective Actions
Channel manager should attempt to
find out why members have
performed poorly

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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