Chapter 14Chapter 14

Evaluating Channel Member Performance

Evaluating Member Evaluating Member

PerformancePerformance

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Objective 1:

The importance of channel member performanceequals that of employee evaluations within the firm.

1. The channel manager works with individual firmsrather than with individual employees.

2. The setting is interorganizational rather thanintraorganizational.

1. The channel manager works with individual firmsrather than with individual employees.

2. The setting is interorganizational rather thanintraorganizational.

Except

1414Scope & Frequency Scope & Frequency of Evaluationsof Evaluations

Objective 2:

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

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

1414Degree of ControlDegree of Control

Control that a producer,manufacturer, or franchisor has

over members is based onstrong contractual agreements

Control that a producer,manufacturer, or franchisor has

over members is based onstrong contractual agreements

Channel managercan demand a great deal of

information on memberoperations

Channel managercan demand a great deal of

information on memberoperations

Manufacturer lacksstrong market acceptancefor its products & strong

channel control based oncontractual commitments

Manufacturer lacksstrong market acceptancefor its products & strong

channel control based oncontractual commitments

Manufacturercan exert little control

over channel members

Manufacturercan exert little control

over channel members

1414Importance of Channel MembersImportance of Channel Members

Evaluation of channel members is more comprehensive for manufacturers who sell all of theiroutput through intermediaries than for manufacturers

who rely less on intermediaries.

Evaluation of channel members is more comprehensive for manufacturers who sell all of theiroutput through intermediaries than for manufacturers

who rely less on intermediaries.

Because the firm’s success in the market is directlydependent on the channel members’ performance

Because the firm’s success in the market is directlydependent on the channel members’ performance

Why?

1414Nature of the ProductNature of the Product

The more complex the product, the broader the scope of evaluation

The more complex the product, the broader the scope of evaluation

For products of very high unit value, thegain or loss of a single order is important to the manufacturer

For products of very high unit value, thegain or loss of a single order is important to the manufacturer

+

1414Number of Channel MembersNumber of Channel Members

Manufacturers who useintensive distribution

Manufacturers who useintensive distribution

Channel memberevaluation may

be cursory

Channel memberevaluation may

be cursory

Manufacturers who usehighly selective

distribution

Manufacturers who usehighly selective

distribution

Channel memberevaluation is

comprehensive

Channel memberevaluation is

comprehensive

Evaluation versus MonitoringEvaluation versus Monitoring1414Objective 3:

Performance Evaluation

Day-to-DayMonitoring

Overall performancereviews that give

management a complete& objective analysis of

each distributor’soperations

Appraisals that assist management in

maintaining currentoperating control ofdistributors’ efforts

1414Performance AuditPerformance 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 thenumber of inadequate performances

Objective 4:

1414Key Criteria for Key Criteria for Performance AuditPerformance Audit

Objective 5:

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

1414Sales PerformanceSales Performance

Criteria channel managershould use to evaluate sales data:

1.

Comparisons of thechannel member’s current

sales to historical sales

2.

Cross comparisons ofa member’s sales with

those of other members

3.

Comparisons of thechannel member’s sales

with predetermined quotas

1414Inventory MaintenanceInventory Maintenance

1. Total level of channel member’s inventory2. Shelf or floor space devoted to inventory3. Shelf or floor space provided relative to competitors’

inventory4. Breakdown by particular products in units & dollars5. Comparison of figures with channel members’ estimated

purchases of related & competitive lines6. Condition of inventory & inventory facilities7. Amount of old stock on hand & efforts made to move it8. Adequacy of channel member’s inventory control &

record-keeping system

Key Criteria for evaluating member inventory performance:

1414Selling CapabilitiesSelling Capabilities

Manufacturer who obtains sales recordsfor channel members’ salespeople should

examine the following factors:

1.

Number of salespeoplethe channel member

assigns to manufacturer’sproduct line

2.

Technical knowledge and competenceof channel member’s salespeople

3.

Salesperson interestin manufacturer’s products

Attitudes

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Negative ones often addressed after they have contributed

to poor performance

Attitudes of Channel MembersAttitudes of Channel Members

Should be evaluated independently of sales data

Not usuallyevaluated unless

sales performanceis unsatisfactory

1414CompetitionCompetition

Channel manager should consider two types of competition:

1.

Competition from otherintermediaries

2.

Competition fromother product lines

carried by the manufacturer’s ownchannel members

General Growth ProspectsGeneral Growth Prospects1144

Key issues for evaluating channel member growth prospects:

1. Past performance2. Overall performance3. Expansion or improvement of organization4. Level of growth and qualification in personnel5. Management, age, health, or succession

arrangements6. Adaptability & overall capacity to meet market

expansions7. Member’s estimates of its own medium- & long-range

outlooks

Applying Performance CriteriaApplying Performance Criteria1144

Objective 6:

Three Approaches

1. Separate performanceevaluations on one or more criteria

2. Multiple criteria combined informallyto evaluate overall performance

qualitatively

3. Multiple criteria combined formallyto arrive at a quantitative index of

overall performance

Separate Performance Separate Performance EvaluationsEvaluations

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Commonly used when the number of channelmembers is very large & when criteria arelimited to no more than sales performance,inventory maintenance, & possible selling

capabilities

Multiple Criteria Combined Multiple Criteria Combined InformallyInformally

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Operational performance measures obtained

Managerial judgment usedto combine performance measures

Qualitative judgment made aboutoverall channel member performance

1414Multiple Criteria Combined Multiple Criteria Combined FormallyFormally

5 Steps1. 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

1414Recommending Recommending Corrective ActionsCorrective Actions

Channel manager should attempt tofind 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

Objective 7: