Transcript Channel Member Selection 7

Chapter 7
Selecting the Channel Members
Major Topics for Ch. 7
1. Channel Structure and Selection Issue**
2. Selection Process
3. Selection Criteria*
4. Offering Inducements**
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Channel Member Selection
The last phase of channel design
Selection may or may not be the result of channel design.
Firm may need additional
outlets to allow for growth
To replace channel
members that have left
Topic 1
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Distribution Intensity & Selection
The greater the intensity of distribution
The less the emphasis on
qualification, screening, and selection
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Distribution Level & Selection
The more the levels of distribution
The less control over selection
in lower levels from manufacturer
cf) Tiered Supply System in Auto Industry
Ownership/Function & Selection
As more functions are performed by intermediaries
The more emphasis on
qualification, screening, and selection
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Topic 2
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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)
Cf) OEM’s Supplier Selection: Two-step Process
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Finding Members
1. Field sales
Organization*
7. Other sources
6. Trade shows*
5. Advertising
2. Trade sources
3. Reseller inquiries*
4. Customers
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.
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Trade Sources
•
•
•
•
•
Trade associations
Trade publications
Directories
Trade shows
Firms selling similar
products
• The “grapevine”
•
•
•
•
•
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
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Reseller Inquiries
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Many firms learn about direct
inquiries from intermediaries
interested in handling their product.
Reseller
Inquiries
Firms receiving the highest number
of inquiries are the more
prestigious in their industry.
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Customers
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.
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.
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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.
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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
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Topic 3
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(Distributor) Selection Criteria*
• Credit & Financial
Condition*
• Sales Strength
• Product Lines
• Reputation
• Market Coverage
• Sales Performance
• Management
Succession
• Management Ability
• Attitude*
• Size
• Channel Member Recruiting Issues*
- Know Specific qualifications for success in
this channel role.*
- Specify Precise products or channel
assignment responsibility of channel
members.*
– The bounds of authority of the prospective
channel member. = Control Rights
– The way in which the role might be expected to
change over time.
©McGraw-Hill Companies, Inc. 2002
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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 (tie)
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
©McGraw-Hill Companies, Inc. 2002
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• 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.
©McGraw-Hill Companies, Inc. 2002
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Topic 4
Offering Inducements**
1. Good, profitable product line*
2. Advertising & promotional support
3. Management assistance
4. Fair dealing policies &
Friendly relationships
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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
Ex) VARs in IT channel
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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.
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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
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4. Fair Dealing &
Friendly Relationship
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Manufacturer’s Responsibility:
To establish a good relationship based on trust
and concern for their welfare as both business
entities and as people
My Research Findings
Incentives
• Money
• Capability
Outcome
Channel
Member
Compliance
Securing Channel Members for
the Long Term*
• Assume responsibility for making
intermediaries more effective:
– Joint product development
– Careful pricing & ordering policies
– Shared training programs
• Equity/Justice
– Procedural Justice
– Distributive Justcie
©McGraw-Hill Companies, Inc. 2002
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