1. Evaluating Channel Member Performance
Part 3: Managing the Marketing Channel
Evaluating Channel Member Performance

2. Scope & Frequency of Channel Member Evaluations2
The importance of channel member performance evaluation
equals that of employee evaluations within the firm.
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

3. Degree of Control 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

4. Importance of Channel Member Evaluation
More substantially use of intermediaries – greater need for evaluation because the firm’s success is directly dependent on it.
The more complex the product – the broader the scope of evaluation because the process is more complicated.
Higher unit value products – the greater the importance of evaluation because the impact of a single order is important to the manufacturer.
The more exclusive the distribution strategy – the greater the need for comprehensive evaluation.

5. Discussion Question #5
Holiday Inn, a division of Inter Continental Hotels Group PLC, recently terminated 700 Holiday Inn franchise channel members. According to Holiday Inn, these channel members failed to meet Holiday Inn’s minimum standards. Over the years, the channel members did not make regular renovations and they were not willing to make the necessary investments in upgrades, such as new bedding, bathroom fixtures and other improvements, that would help to position Holiday Inn as a more upscale chain of hotels. Many of the channel members felt blindsided by what they saw as the franchisor’s stringent requirements and rigorous enforcement. Some of the franchisees had been associated with Holiday Inn for decades and felt that they had been loyal and productive channel members. They questioned the fairness of Holiday Inn’s negative evaluation of their performance.
Do you think Holiday Inn’s termination of so many channel members was “fair”? Discuss from the point of view of the franchisor (Holiday Inn) and the franchisees (channel members).

6. Evaluation versus Monitoring3
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

7. Performance Audit 4 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

8. Key Criteria for Performance Audit: Sales Performance
1. Comparisons of the channel member’s current sales to historical sales
Cross comparisons of a member’s sales with those of other members
Comparisons of the channel member’s sales with predetermined quotas

9. Key Criteria for Performance Audit: Inventory Maintenance
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

10. Key Criteria for Performance Audit: Selling Capabilities
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
Technical knowledge and
competence of channel
member’s salespeople
Salesperson interest
in manufacturer’s products

11. Key Criteria for Performance Audit: Attitudes of Channel Members
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

12. Key Criteria for Performance Audit: Competition
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

13. Key Criteria for Performance Audit: General 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

14. Discussion Question #3
U.S. Jaguar dealers used to wait at least one week to receive parts from England. Parts were shipped in bulk by Jaguar to a U.S. warehouse where they were split up, repackaged and then shipped to individual dealers. Working closely with Federal Express, Jaguar initiated a new logistics system that shortened the time by four days. Under the new system, dealers order a part directly from Jaguar in England and the part is then air expressed via Federal Express. The time between order placement and receipt at the dealership is no longer than three days.
Comment on the change in Jaguar’s logistics system in terms of its relevance for providing customer service and the possible trade-offs in higher costs.

15. Three Approaches to Applying Performance Criteria6
Separate performance evaluations
Multiple criteria combined INFORMALLY
Operational measures obtained then
Managerial judgement used to combine measures
Qualitative judgement used to determine overall performance.
Multiple criteria combined FORMALLY

16. Multiple Criteria Combined Formally
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