Success Strategies in Channel
Management
Motivating New Channel Members
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Motivating New
Channel Members
11.2 Motivational
Concepts and
Processes
Sec11.2.ppt
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Motivating New Channel
Members
Securing Recruits for the Long
Term
The Channel Relationship
Life Cycle
Improving Service to
Channel Partners
How Do You Create
Trust in a Channel?
The Fundamental Role
of Economic
Satisfaction
What produces noneconomic satisfaction?
What inspires a
channel member's
confidence?
How the Other Side
Gauges Your
Commitment
Actions That Bind
Suppliers to
Distributors
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Motivating New Channel Members
In marketing channels, success or
failure usually depends on how well
channel members tailor their value
offers to meet customer requirements.
This is more likely to occur if new
channel members are motivated to
perform effectively as part of a team.
But motivating channel
intermediaries is quite unlike
motivating one's own employees.
Special measures are required to
motivate new channel intermediaries.
First, the needs and problems of the
new intermediary should be
determined.
Then, in response to this new
understanding, recruiting firms
should provide the type and level of
support that is appropriate to those
needs and problems.
Finally, recruiting firms should
exercise the leadership necessary to
maintain motivated teams of
intermediaries.
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Motivating New Channel Members
Intermediaries are likewise motivated by their partner's willingness to
provide them with adequate support.
Support generally involves the provision of some combination of personal
selling, advertising, or promotional assistance or training for selected
intermediary personnel.
Profit making is a principal requirement of business.
Profits are a prime motivator, as well. The assurance of a future business
relationship and an ongoing stream of income are also prime motivators for
intermediaries.
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Securing Recruits for the Long Term
Once the recruiting and recruited firms join together, a marriage of sorts
begins. Naturally, a brief honeymoon period follows. But when the
honeymoon is over, the firms must start working at converting their
fledgling relationship into an ongoing success. With this in mind, we
consider how new channel memberships may be secured by recruiting
firms.
The notion of a partnership remains essential throughout these early stages of
the relationship. When producers or retailers turn to intermediaries for
distribution help, they do so out of a perceived necessity.
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Improving Service to Channel Partners
What exactly makes up a relationship? First, a relationship is no better or
worse than the total package of benefits channel partners achieve from it. In
the language of modern marketing, such a benefit package is called a value
bundle.
Benefits can also result from the relationship itself. Interpersonal exchanges
among persons involved in buying and selling relationships can have
intangible but genuine value. Conversely, in some situations the package of
benefits might not include personal contact. In many business sectors,
reordering or conducting other aspects of the transaction through
automated, on-line systems is more efficient.
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Improving Service to Channel Partners
Efforts aimed at securing
relationships by providing better
service should feature more than
product-related functions or
camaraderie among boundary
personnel, however. Instead, an
entire range of possibilities by which
a producer (retailer) can contribute to
its customer's (supplier's) operations
should be considered.
Approaching the issue of service
provision from a broader perspective
allows producers or wholesalers to
develop value-based pricing.
The provision of good service can be
likened to an ongoing, continuously
adaptive performance.
Get and keep close to customers.
One reason channel relationship
problems continue to persist is that
individuals active in different
functional areas within a given
organization often have different
incentives. Thus, they view
customers and the need for service
differently.
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Expectations of Continuity
A channel member who wants to build commitment into a
relationship must begin by enhancing the expectation that the
prospective partners will be doing business with each other for
a long time. The expectation of continuity is essential before
any organization will cooperate and invest to build a future.
And continuity is not taken for granted. Channel members
know that they will be replaced if their performance doesn't
satisfy.
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What inspires a channel member's confidence
that a business relationship will last?
Several key factors have been identified for downstream channel
members. Their expectation of doing future business on behalf
of a principal strengthens for:
• Producers whom they trust
• Producers with whom they enjoy two-way communication,
including active give and take of ideas
• Producers who enjoy a reputation for treating other channel
members fairly
• Producers with whom they have been doing business for some
time already
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What inspires a channel member's confidence?
Communication plays a particularly powerful role. Trust and
communication operate in a reinforcing cycle: the more trust, the more
communication, which leads to more trust, which strengthens
communication even more, and so forth. Frequent, candid, detailed mutual
communication is a must for a healthy channel partnership.
This is a hidden problem in old, seemingly stable channel relationships.
Communication is often rather low in these older relationships, as though the
two parties think they know each other so well that communication is
superfluous. Older channel relationships frequently look stronger than they
really are, because both sides take them for granted and permit
communication to decline.
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What inspires a channel member's confidence?
Old relationships, whose continuity is assumed by both sides, can
disintegrate suddenly. The catalyst is frequently a change in management
in either organization - typically, executive succession for the agent or
distributor, manager rotation for the producer. But the underlying reason is
not so much the change in management as it is the decline of
communication and the subsequent hollowing out of trust in old
relationships.
Continuity expectations are higher when power is balanced in a
relationship. When power is imbalanced, the weaker party fears being
exploited and is more likely to defect.
That the relationship has a future in the eyes of the players is a minimal
condition for building commitment. To erect a true alliance, the next step
is crucial: Each side must believe that the other is committed.
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How the Other Side Gauges Your Commitment
Consider that you are a distributor dealing with a supplier. You will gauge the
supplier's commitment to you based on its past behaviour. You focus on
two critical aspects:
(1) Have you had an acrimonious past with this supplier? and
(2) What actions do you see the supplier taking to tie itself to doing business
with you?
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Actions That Bind Distributors to Suppliers
Thus, supplier-specific investments serve three purposes:
(1) They expand the channel pie,
(2) they keep the distributor motivated to stay in the alliance, and
(3) they are a convincing signal to the supplier that the distributor really is
committed - which invites the supplier to reciprocate with its own
commitment.
Another important element is reputation.
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Actions That Bind Suppliers to Distributors
Suppliers that make distributorspecific investments increase their
commitment, because they know the
assets will lose value if the distributor
is replaced.
Two-way communication also plays
a very substantial role in assuring
supplier commitment.
Commitment is costly.
Alliances take time, risk, resources,
and determination - from both sides.
To justify these costs, alliances must
generate exceptional returns. When
they do, it is because they have made
relationship-specific investments and
have driven their organizations to
communicate frequently, intensely,
and thoroughly.
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Building Commitment by the Management Of
Daily Interactions
Daily interactions between
individuals in the channel drive the
"channel culture" to improve,
degrade, or stay stable. This
creates a very complex picture. The
cumulative effect of daily
interactions conditions the
relationship heavily In particular,
the daily detail of events and oneon-one interactions determine how
much trust exists, which is essential
for an alliance to function.
How Can Channel Members
Manufacture Trust?
Trust, although easy to recognize, is
difficult to define. In channels, your
trust in a channel member is usefully
conceptualized as your confidence
that the other party is honest (stands
by its word, fulfils obligations, is
sincere).
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The Fundamental Role of Economic Satisfaction
Channel members commit in the
rational expectation of financial
rewards. They will not commit
without the prospect of financial
returns, and they will not wait
indefinitely for those rewards to
materialize. Economic satisfaction
plays a fundamental role in building
and maintaining the trust that is
necessary for committed
relationships.
Economic satisfaction is a positive,
affective (emotional) response to the
economic rewards generated by a
channel relationship.
Non-economic Satisfaction Also
Matters
A satisfied channel member finds
interactions with the channel partner
fulfilling, gratifying, and easy.
Contacts with the other party are
appreciated. It likes working with its
partner and perceives the partner to
be concerned, respectful, and willing
to exchange ideas (one foundation of
two-way communication).
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What produces non-economic satisfaction?
Two drivers stand out by their absence. One is the absence of dysfunctional
conflict, which is lingering, unresolved intense disputes over major issues.
The other is the absence of coercion by the other side. A party that sees its
counterpart employing pressure, punishment, threats, and retribution
experiences a rapid decline of positive sentiment, even if the relationship
moves in a direction that the channel member favours.
Non-economic satisfaction is also bound up in perceptions of fairness on two
fronts. One is procedural fairness, the sense that one is treated equitably on
a day-to-day basis, regardless of the rewards derived from the relationship.
The other is distributive fairness, the sense that one gains equitable
rewards from the relationship, regardless of daily interaction patterns.
Distributive and procedural equity reinforce non-economic satisfaction.
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What produces non-economic satisfaction?
Trust is never awarded. It is earned.
This takes time and effort, and may not
work anyway.
This is why many organizations build
on what they already have..
Of course, organizations do not always
work with organizations they know. In
building trust with another organization,
it is useful to select one with similar
goals. Goal congruence is effective in
dampening conflict.
Organisations do business with
organisations they know, and they extend
their network by working with firms that
are known by the firms they know
(referral). Personal relationships and
reputations between people in the channel
organizations play an important role in
making existing relationships deeper,
increasing the social capital that is
already embedded in them.
Some environments are conducive to
building trust. Trust goes up in generous
("munificent") environments, ones that
offer resources, growth, and ample
opportunity. These environments provide
every incentive to work together, with
rewards to be had by everyone.
Conversely, trust goes down in volatile,
complex, unpredictable environments.
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Decision Structures That Enhance Trust
The decision making that goes on inside a marketing channel has a structure. One very
important element of that structure is how much it is centralized in the
upper reaches of an organization's hierarchy. This may be upstream or
downstream.
Whatever its source, centralization hurts trust.
Concentrating decision power in the upper echelons of one organization (as
opposed to delegating decision making to the field level, preferably in both
organizations) undermines the participation, cooperation, and daily
interaction that help trust grow..
Another aspect of a channel's decision-making structure is formalization, the
degree to which decision making is reduced to rules and explicit
procedures.
Formalization is widely considered to hurt trust.
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How Do You Create Trust in a Channel?
The top management of organizations can attempt to create a structure
conducive to building trust and hope that employees will alter their
everyday behaviour accordingly.
Ultimately, however, structures and policies to implement them only create a
foundation for trust. From there, it is the daily interactions between people
and the accumulation of experience that turn a structural opportunity into
an operating reality. The bad news is that this is a slow, expensive, and
uncertain process.
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Recognizing the Channel Relationship Life
Cycle
How To Secure Channel Membership
Relationship Life Cycle
Desired Channel Member Behaviours
• Birth
Explain its operating philosophies, goals, and objectives
• Growth
Address initial problems; don't let issues linger unresolved
Honestly and sincerely strive to be opportunity driven
Seek efficiency within and through the relationship
• Maturity
Communicate, communicate, communicate
Continuously strive to strengthen relationship
• Death
Get out - fast
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The Life-Cyle of a Marketing Channel
Partnership
Phase 1: Awareness.
Phase 2: Exploration
Aware that a feasible exchange partner
has not made contact to explore doing
business or upgrading their one-by-one
business dealings into a stronger, more
continuous relationship. This phase can
last a very long time, with no real
progress. Or it can disappear: Either
organisation could discard the other
from its partner-ship consideration set.
Or the arrangement can move to:
Firms investigate forging a stable
relationship together. They may test
each other during a trial and
evaluation period (which can be
lengthy, especially for important, risky,
or complex channel flows). Each side
forecasts and weighs the costs and
benefits of creating a close marketing
channel together.
You can't start out with a full-blown
relationship. It's got to be incremental.
You get closer as each side takes small
steps.
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Phase 3: Expansion.
The firms grow their relationship
considerably. Each is deriving greater
benefits, developing greater
motivation, and elaborating their
relationship. Trust is spiralling;
interdependence is increasing. They
cooperate and feel they are pursuing
common goals. Interaction becomes
much greater than strictly necessary,
in part because each side's personnel
likes the communication.
Over time, you build a history of
situations, compromises, and
solutions. You learn the unwritten
rules and how they want to play the
game, which makes it increasingly
easier to do business.
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Phase 4: Commitment.
The alliance is now easily recognizable by the stability both believe to exist in their
relationship. Further, both sides invest heavily to maintain the strong partnership
they have achieved. Neither side is very open to overtures by other firms: They
prefer doing business with each other.
We're in this together and the attitude is, here's what I need, what's that going to do to
you?
We want continuity. . It takes a lot of communication and trust.
We are constantly changing things to try and improve the way we do business
together. Costs are incurred on both sides but we are willing to pay them. We
have learned a lot from them. They have made us a better printing company
because they are demanding, innovative, and willing to try things.
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Phase 5: Decline and Dissolution.
Dissolutions are usually accompanied by acrimony. Frequently, they are
initiated by one side, which has grown dissatisfied with the arrangement.
This side begins to withdraw and to behave in a manner inconsistent with
commitment. This annoys the other party, which often reciprocates with
neglectful, damaging, even destructive behaviour. Decline rapidly takes on
a momentum of its own.
Decline and dissolution often happen because one party takes the
relationship for granted and doesn't work to keep it going. Sometimes,
one party sabotages the relation-ship, perhaps to free itself to move on to
other opportunities. Usually, decline is a lingering process. It may not be
apparent that decline has set in until it is too far advanced to he repaired.
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What It Takes and When It Pays To Create A
Marketing Channel Alliance
An alliance is more likely to hold together and to meet their
expectations when:
1. One side has special needs.
2. The other side has the capability to meet these needs.
3. Each side faces barriers to exiting the relationship.
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