Motivating Channel Members Chapter 9 Motivating Channel Members

Channel Management Channel Management: Objectives 1 & 2: 9 Channel Management Channel Management: Refers to the administration of existing channels to secure the cooperation of channel members in achieving the firm’s distribution objectives.

Channel Management Channel Management: 3 main points Objectives 1 & 2: 9 Channel Management Channel Management: Refers to the administration of existing channels to secure the cooperation of channel members in achieving the firm’s distribution objectives. 3 main points It deals only with existing channels Administrative actions are necessary as members do not automatically cooperate The role distribution plays in achieving success is equally important in managing as it was in design.

Motivation Management 9 Motivation Management A fundamental aspect of channel management is the motivation of members. Motivation: Refers to the actions taken by the channel manager* to foster channel member cooperation in implementing the channel manager’s* distribution objectives. Note: “Channel manager” was substituted for “manufacturer”

Motivating Channel Members Objective 3: 9 Motivating Channel Members 3 Basic Tasks of Motivation Management: Find out the needs and problems of channel members. Offer support to the channel members that is consistent with their needs and problems. Provide leadership through the effective use of power.

Channel Members’ Needs and Problems Objective 4: 9 Channel Members’ Needs and Problems Members may perceive needs & face problems quite different from channel manager (e.g., manufacturer).

Channel Members’ Needs and Problems Objective 4: 9 Channel Members’ Needs and Problems Members may perceive needs & face problems quite different from channel manager (e.g., manufacturer). For example… Member may not view itself as a “hired” member but only an outlet. Member may act first on behalf of its customer not the channel manager who’s seen as second (at best). Member may view channel manager’s product as only one in an assortment of many that comprise the member’s overall value proposition.

Resource Integration & and the Structuration of Ecosystems Resource Integrator/Beneficiary (“Firm”) (“Customer”) Resource Integration & and the Structuration of Ecosystems Resource Integrator/Beneficiary (“Firm”) (“Customer”) Macro Resource Integrator/Beneficiary (“Firm”) (“Customer”) Meso Micro Institutions Individual Actors (Resource Integrators)

Channel Members’ Needs and Problems 9 Channel Members’ Needs and Problems Approaches for learning about members’ needs and problems include: Research studies by channel members Research studies by outside parties Marketing channel audits Distributor advisory councils

Research Studies by Channel Managers 9 Research Studies by Channel Managers Less than 1% of manufacturers’ research budgets are spent on channel member research But… Manufacturer-initiated research can be useful because certain types of needs or problems may not be obvious without investigation.

Research Studies by Outside Parties 9 Research Studies by Outside Parties Why use outside parties to conduct channel research? They tend to provide a higher level of objectivity. They provide a level of expertise that the channel manager may not possess in conducting this type of research. The channel manager may not have a market research function or it may be too small.

Marketing Channel Audits 9 Marketing Channel Audits 3 General Tasks Involved: Gather data on how channel members perceive the channel manager’s marketing programs as facilitating the performance of distribution. Locate the strengths and weaknesses in the individual relationships. Learn what is expected of the channel manager to make the channel relationship viable and optimal.

Marketing Channel Audits 9 Marketing Channel Audits How does one insure that an audit is effective? It must identify & define, in detail, the issues relevant to each dyad within the channel. Issues chosen for the audit should be cross-referenced with any relevant variables (e.g., firm size, geographic location, etc.) It must be conducted periodically so as to capture possible trends/patterns.

Distributor Advisory Councils 9 Distributor Advisory Councils Who’s involved? Top management representatives from a representative sample of channel member firms. What are the benefits? Provides recognition for the channel members Provides a vehicle for identifying and discussing mutual needs & problems Results in a overall improvement in channel communication

Supporting Channel Members Objective 5: 9 Supporting Channel Members 3 General Types of Programs: Cooperative Arrangements Partnership or Strategic Alliance Distribution Programming

Cooperative Arrangements 9 Cooperative Arrangements Typical types of cooperative arrangement programs provided by manufacturers: Cooperative advertising allowances Contests for buyers, salespeople, etc. Storage allowances In-store promotional displays & “monies” Category managers to assist in managing inventories & display Free merchandise

Cooperative Arrangements 9 Cooperative Arrangements 3 General Benefits: Focus on channel members’ needs and problems Simple and straightforward Convey a clear sense of mutual benefit

Partnerships & Strategic Alliances 9 Partnerships & Strategic Alliances Focus on a continuing and mutually beneficial relationship between the channel members in an effort to provide a more highly motivated team, network, or alliance of channel members.

Partnerships & Strategic Alliances 9 Partnerships & Strategic Alliances Channel managers should… Make an explicit statement of policies in areas such as product availability, technical support, pricing, etc. Assess all existing channel members as to their capabilities for fulfilling their roles. Appraise the appropriateness of the policies guiding one’s relationship(s) with the channel members.

Distribution Programming 9 Distribution Programming Distribution programming: Refers to a comprehensive set of policies for the promotion of a product through the channel. Is developed as a joint effort between the manufacturer and the other channel member(s) in order to incorporate the needs of all parties involved.

Distribution Programming 9 Distribution Programming Steps performed by the channel manager: Develop marketing objectives & determine the kinds of support needed from channel members Ascertain channel members’ needs & problem areas Formulate specific channel policies that determine the overall level of: Price concessions to/from channel members Financial advice or assistance for/from channel members Protection for/from channel members

Relationship Differences Objective 6: 9 Relationship Differences Cooperative Arrangements Intermittent interactions between members Partnerships or Strategic Alliances Continuing & mutually supportive relationships Distribution Programming Deals with virtually all aspects of the channel arrangement

Objective 7 & 8: 9 Selective Use of Power Channels are not superior/subordinate systems like intraorganizational systems They’re loosely aligned even in V-M channels Reward/penalty system is less effective Diffused perspective on goals & direction limits overall efficiency even in well-planned channels Remember the goal of every channel is to what?