Chapter 14
Evaluating Channel Member
Performance
Objective 1:
Evaluating Member
Performance
The importance of channel member performance
equals that of employee evaluations within the firm.
Except
1. The channel manager works with individual firms
rather than with individual employees.
2. The setting is interorganizational rather than
intraorganizational.
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Objective 2:
Scope & Frequency
of Evaluations
1. Degree of the manufacturer’s control over
channel members
2. Relative importance of channel members
3. Nature of the product
4. Number of channel members
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Degree of Control
Control that a producer,
manufacturer, or franchisor has
over members is based on
strong contractual agreements
Channel manager
can demand a great deal of
information on member
operations
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Manufacturer lacks
strong market acceptance
for its products & strong
channel control based on
contractual commitments
Manufacturer
can exert little control
over channel members
Importance of Channel Members
Evaluation of channel members is more
comprehensive for manufacturers who sell all of their
output through intermediaries than for manufacturers
who rely less on intermediaries.
Why?
Because the firm’s success in the market is directly
dependent on the channel members’ performance
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Nature of the Product
The more complex the product,
the broader the scope of evaluation
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For products of very high unit value, the
gain or loss of a single order is
important to the manufacturer
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Number of Channel Members
Manufacturers who use
intensive distribution
Channel member
evaluation may
be cursory
Manufacturers who use
highly selective
distribution
Channel member
evaluation is
comprehensive
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Objective 3:
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Evaluation versus Monitoring
Performance
Evaluation
Overall performance
reviews that give
management a complete
& objective analysis of
each distributor’s
operations
Day-to-Day
Monitoring
Appraisals that assist
management in
maintaining current
operating control of
distributors’ efforts
Objective 4:
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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Objective 5:
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 member’s current
sales to historical sales
Comparisons of the
channel member’s sales
with predetermined quotas
2.
Cross comparisons of
a member’s sales with
those of other members
Inventory Maintenance
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 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 member’s 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 manufacturer’s
product line
Salesperson interest
in manufacturer’s products
2.
Technical knowledge and competence
of channel member’s salespeople
Attitudes of Channel Members
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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
manufacturer’s own
channel members
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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. Member’s estimates of its own medium- & long-range
outlooks
Objective 6:
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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
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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Objective 7:
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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