Chapter 7 Selecting the Channel Members

While developing a channel’s structure is quite complicated… –It’s equally, if not more, important to select the right channel members. –Why? Channel Member Selection 7 Objective 1:

Channel Member Selection 7 This is the last phase of channel design However, –It’s most often not the result of channel design Instead, –Occurs more often to 1.Account for additional growth needed 2.Replace members that have left (voluntarily or involuntarily)

Relationship with Channel Design Channel Design7 Objective 2: Firms with direct channels need not worry (as much*) Regarding Intensity… –The greater (lesser) the intensity of distribution, the lesser (greater) the emphasis placed on member selection –Again, comes back to cost and control

3 Step Selection Process 7 1.Finding prospective channel members 2.Applying selection criteria to determine the suitability of prospective members 3.Securing the prospective channel members as actual channel members

Finding Possible Members 7 Objective 3: In order of likely importance to the channel manager… 1.Field sales organization 2.Trade sources 3.Reseller inquires 4.Customers 5.Advertising and promotion 6.Trade shows 7.Other sources

Salespeople are the best positioned to: –Pick up information about available or likely intermediaries –Know more management & salespeople of major intermediaries in a territory who are not currently members –Have lined up prospective intermediaries because of existing relationships (even if not members) Field Sales Organization 7

Possible problems include: –Manufacturers may not adequately reward their salespeople for their time and effort in establishing these connections Rewards are often sales volume focused –Rewards push salespeople to work outside their existing, or formalized, roles –Remember Bucklin’s Payoff & Tolerance Functions? Rewards are Critical for One’s Field Sales Organization 7

Often the most specific information regarding an industry come from these sources –Include Trade associations Trade publications Directories Trade shows Firms selling similar products The “grapevine” Trade Sources 7

Reseller Inquires 7 Occurs when a channel manager learns about possible future members through direct inquires from those interested in handling their products or selling through their firms (e.g., retailers & wholesalers) Often the main source of information about possible future members However, firms receiving the highest number of inquires are often the more prestigious & thus less likely in need because of their success

Customer Sources 7 Customers are often willing to give frank opinions about the intermediaries who source them. –Can be… Business customers, or End users One of the best ways to gain information about potential members is through formal or informal surveying

Trade Publication Advertising 7 Can generate a large number of inquires (from both up & down the channel) –Often leads to a large pool from which to select –But, –Has great potential to generate a large pool of ill-fitted applicants too. Why?*

Trade Shows & Conventions 7 Attending annual conventions gives the channel manager access to a wide variety of potential channel members at one place an time Extremely beneficial to small manufacturers & retailers to meet with firms who might be interested in their market strategy to provide a unique advantage only available from a small firm (e.g., less power, better info, etc.)

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

1. Credit & Financial Condition 2. Sales Strength 3. Product Lines 4. Reputation 5. Market Coverage 6. Sales Performance 7. Management Succession 8. Management Ability 9. Attitude 10. Size Possible Selection Criteria 7 Objective 4:

Adapting Selection Criteria 7 Objective 5: Just like no heuristic is always true because of the interconnectedness of the 4Ps… No list of criteria is adequate for a firm in all conditions –Channel managers must be flexible when using selection criteria and account for factors that are likely to be firm- or industry-specific

Securing Channel Members 7 Objective 6: Often a 2-way street –Size & prestige will change extent of 2-way An effective selling job is necessary to secure good intermediaries –A function of: Channel positioning Inducements used –Must highlight manager’s commitment to support channel & be mutually beneficial to both parties

Offering Inducements 7 Objective 7: Often the more explicit in spelling out kinds of support, the better –Members want to know “what’s in it for them” While many types of possible inducements exist, most will fit into one of four areas 1.Product line 2.Advertising & promotion 3.Management assistance 4.Fair dealing & friendly relationships

Product Line Inducements 7 Product line inducements… 1.Include manufacturers offering good product lines with strong sales figures and profit potentials 2.Should stress value of a good product line from the channel member’s perspective

Advertising & Promotion Inducements 7 Advertising and promotions inducements… –In the consumer market Should gain immediate creditability by using a strong program of national advertising –In the industrial market Should gain recognition by using a strong program of trade paper advertising

Management Assistance as an Inducement 7 Management assistance inducements… –Should highlight to prospective members where the channel manager will help with the following: 1.Training 2.Financial analysis & planning 3.Market analysis 4.Inventory control 5.Effective promotion (both methods & support)

Fair Dealing & Friendly Relationships 7 Objective 8: It’s the channel manager’s responsibility to… 1.Convey they s/he is genuinely interested in establishing a good relationship based on trust 2.Demonstrate concern for the well-being of all members both as business entities and as people in general