Chapter 14 Evaluating Channel Member Performance Objective 1

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 2. rather than with individual employees. 2. The setting is interorganizational rather than 3. intraorganizational. 14

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 14

Degree of 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 14 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 14

Nature of the Product The more complex the product, the broader the scope of evaluation + For products of very high unit value, the gain or loss of a single order is important to the manufacturer 14

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 14

Objective 3: 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 14

Objective 4: Performance Audit Three Phases 1. Developing criteria for measuring channel member performance 2. Periodically evaluating the channel members’ 3. performance against the criteria 3. Recommending corrective actions to reduce the 4. number of inadequate performances 14

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 14

14 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 6. 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 & 9. record-keeping system 14

14 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 4 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 14 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

General Growth Prospects Key issues for evaluating channel member growth prospects: 1. 2. 3. 4. 5. 6. 6. 7. 7. 8. 9. Past performance Overall performance Expansion or improvement of organization Level of growth and qualification in personnel Management, age, health, or succession arrangements Adaptability & overall capacity to meet market expansions Member’s estimates of its own medium- & long-range outlooks 14

Objective 6: 14 Applying Performance Criteria 1. Separate performance 2. 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 14

Multiple Criteria Combined Informally Operational performance measures obtained Managerial judgment used to combine performance measures Qualitative judgment made about overall channel member performance 14

Multiple Criteria Combined Formally 14 5 Steps 1. Criteria & associated operational measures are decided o 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 criteri 5. Weighted criterion ratings summed to yield overall 6. performance rating for each member

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 14