1. Chapter 14
Evaluating Channel Member Performance

2. Evaluating Member Performance
Objective 1: 14
Evaluating Member Performance
The importance of channel member performance
equals that of employee evaluations within the firm.
Except
The channel manager works with individual firms
rather than with individual employees.
The setting is interorganizational rather than
intraorganizational.

3. Scope & Frequency of Evaluations
Objective 2:
Scope & Frequency of Evaluations 14
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

4. Degree of Control 14 Control that a producer,
manufacturer, or franchisor has
over members is based on
strong contractual agreements
Manufacturer lacks
strong market acceptance
for its products & strong
channel control based on
contractual commitments
Channel manager
can demand a great deal of
information on member
operations
Manufacturer
can exert little control
over channel members

5. Importance of Channel Members14
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

6. + Nature of the Product 14 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

7. Number of Channel Members14
Manufacturers who use
intensive distribution
Manufacturers who use
highly selective
distribution
Channel member
evaluation may
be cursory
Channel member
evaluation is
comprehensive

8. Evaluation versus Monitoring
Objective 3:
Evaluation versus Monitoring 14
Performance
Evaluation
Day-to-Day
Monitoring
Overall performance
reviews that give
management a complete
& objective analysis of
each distributor’s
operations
Appraisals that assist
management in
maintaining current
operating control of
distributors’ efforts

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

10. Key Criteria for Performance Audit
Objective 5:
Key Criteria for Performance Audit 14
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

11. Sales Performance 14 Criteria channel manager
should use to evaluate sales data: 3.
Comparisons of the
channel member’s sales
with predetermined quotas 1.
Comparisons of the
channel member’s current
sales to historical sales 2.
Cross comparisons of
a member’s sales with
those of other members

12. Inventory Maintenance14
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
Breakdown by particular products in units & dollars
Comparison of figures with channel members’ estimated
purchases of related & competitive lines
Condition of inventory & inventory facilities
Amount of old stock on hand & efforts made to move it
Adequacy of channel member’s inventory control &
record-keeping system

13. Selling Capabilities 14 Manufacturer who obtains sales records
for channel members’ salespeople should
examine the following factors: 1.
Number of salespeople
the channel member
assigns to manufacturer’s
product line 3.
Salesperson interest
in manufacturer’s products 2.
Technical knowledge and competence
of channel member’s salespeople

14. Attitudes of Channel Members4
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

15. Competition 14 Channel manager should consider
two types of competition: 1.
Competition from other
intermediaries 2.
Competition from
other product lines
carried by the
manufacturer’s own
channel members

16. General Growth Prospects14
Key issues for evaluating channel
member growth prospects:
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

17. Applying Performance Criteria
Objective 6: 14
Applying Performance Criteria
Separate performance
evaluations on one or more criteria
2. Multiple criteria combined informally
to evaluate overall performance
qualitatively
Three
Approaches
3. Multiple criteria combined formally
to arrive at a quantitative index of
overall performance

18. Separate Performance Evaluations14
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

19. Multiple Criteria Combined Informally14
Operational performance
measures obtained
Managerial judgment used
to combine performance measures
Qualitative judgment made about
overall channel member performance

20. Multiple Criteria Combined Formally14
5 Steps
Criteria & associated operational measures are decided on
Weights assigned to each of the criteria
Each member evaluated is rated on each of the criteria
Score on each criterion multiplied by weight for that criterion
Weighted criterion ratings summed to yield overall
performance rating for each member

21. Recommending Corrective Actions
Objective 7:
Recommending Corrective Actions 14
Channel manager should attempt to
find out why members have
performed poorly
Develop concrete & practical approaches to actively seek information on member needs and problems
Programs of member support must be congruent with member needs & problems
Constraints imposed by interorganizational setting of marketing channel must be understood