7 Selecting the Channel Members Channel Member Selection

7 Selecting the Channel Members

Channel Member Selection and Channel Design • The channel member selection is the last phase of channel design (phase 7). • Selection decisions can also be made independently of channel design decisions when new channel members are added to the channel or when those who have left are replaced. • Only those manufacturers who sell directly to users are not faced with the selection of channel members.

The Selection Process 1. Finding prospective channel members 2. Applying selection criteria to determine the suitability of prospective channel members 3. Securing the prospective channel members as actual channel members

The Selection Process 1. Finding prospective channel members (Search) 2. Applying selection criteria to determine the suitability of prospective channel members (Qualification/Screening) 3. Securing the prospective channel members as actual channel members (Choice)

1. Finding a prospective channel members Variety of sources: • Field sales organization • Trade sources • Reseller inquiries • Customers • Advertising • Trade shows • Other sources

1. Finding a prospective channel members • Field sales organization Salespeople are the best positioned to know about potential intermediaries • They are often able to pick up information about likely intermediaries. • They may have lined up prospective intermediaries. BUT: • The manufacturer must adequately reward salespeople for their time & effort establishing connections.

1. Finding a prospective channel members • Trade sources • • • Trade associations Trade publications Directories Trade shows Firms selling similar products • • • For Example: Industrial Distribution magazine The Verified Directory of Manufacturers’ Representatives The National Association of Wholesaler-Distributors The National Retail Federation The Encyclopedia of Associations

1. Finding a prospective channel members • Reseller inquiries Many firms learn about direct inquiries from intermediaries interested in handling their product. Firms receiving the highest number of inquiries are the more prestigious in their industry.

1. Finding a prospective channel members • Customers are willing to give frank opinions about the intermediaries who call on them. Manufacturer conducts formal or informal surveys of customers’ views of various distributors. = Manufacturer obtains information about potential intermediaries.

1. Finding a prospective channel members • Advertising Trade magazine advertising can generate a large number of inquiries from prospective Members. It therefore can provide a large pool from which to make selections.

1. Finding a prospective channel members • Trade shows Wholesale and retail trade associations hold annual conventions. Attending manufacturers have access to a wide variety of potential channel members. ** Small manufacturers meet face-to-face with wholesalers & retailers.

1. Finding a prospective channel members • Other sources 1. 2. 3. 4. 5. 6. 7. 8. Chambers of commerce, banks, & local real estate dealers Classified telephone directories or the yellow pages Direct-mail solicitations Contacts from previous applications Independent consultations List brokers that sell lists of names of businesses Business databases The Internet

2 Applying selection criteria • Channel Member Selection Criteria by Pegram • Credit & Financial Condition • Sales Strength • Product Lines • Reputation • Market Coverage • Sales Performance • Management Succession • Management Ability • Attitude • Size

2 Applying selection criteria Distributor Selection Criteria Used by Manufacturers (Descending Order) • U. K. Firms Knowledge of market Market coverage Enthusiasm for the product Number and quality of sales personnel – Knowledge of the product – – • U. S. Firms Knowledge of the market Market coverage Previous success Number and quality of sales personnel – Enthusiasm for the product – – Ex) Two Types of Channel Member Qualification: a) Qualification of Reseller’s Ability and Motivation b) Qualification using general criteria and qualification using special criteria

2 Applying selection criteria • Screening Channel Member Candidates Guidelines: – Think about your target market segments. – Level & type of support required by the channel member. – Pick your distributor carefully – weighing all factors; product, size, service, capability. – Remember selling & distribution requirements change over time.

3 Securing the channel members • Offering Inducements 1. Good, profitable product line 2. Advertising & promotional support 3. Management assistance 4. Fair dealing policies & Friendly relationships

3 Securing the channel members 1. Good, profitable Product Line Product line inducements: 1. Manufacturer offers good product line with strong sales & profit potential 2. Stress value of good product line from channel members’ perspective

3 Securing the channel members 2. Advertising & Promotion Advertising & promotion inducements: • Consumer Market: Gain immediate credibility by using a strong program of national advertising. • Industrial Market: Gain recognition by using a strong program of trade advertising.

3 Securing the channel members 3. Management Assistance Management assistance inducements: Prospective members want to know whether the manufacturer will help with the following: • training programs • financial analysis & planning • market analysis • inventory control procedures • promotional methods

3 Securing the channel members 4. Fair Dealing & Friendly Relationship Manufacturer’s Responsibility: • To establish a good relationship based on trust and concern for their welfare as both business entities and as people