ch 7 marketing channels - student version

Chapter 7Chapter 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 Channel Member SelectionSelection

77Objective 1:

Channel Member Channel Member SelectionSelection

77

• 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 needed2. Replace members that have left (voluntarily or

involuntarily)

Relationship withRelationship with Channel DesignChannel Design

77Objective 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 Process3 Step Selection Process77

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 MembersFinding Possible Members77Objective 3:

• In order of likely importance to the channel manager…

1. Field sales organization2. Trade sources3. Reseller inquires4. Customers5. Advertising and promotion6. Trade shows7. 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 OrganizationField Sales Organization77

• 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 Rewards are Critical for One’sOne’s

Field Sales OrganizationField Sales Organization

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• 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 SourcesTrade Sources77

Reseller InquiresReseller Inquires77

• 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 SourcesCustomer Sources77

• 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 Trade Publication AdvertisingAdvertising

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• 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 & Trade Shows & ConventionsConventions

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• 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 SourcesOther Possible Sources77

1. Chambers of commerce, banks, & local real estate dealers

2. Classified telephone directories or the yellow pages

3. Direct-mail solicitations4. Contacts from previous applications5. Independent consultations6. List brokers that sell lists of names of businesses7. Business databases8. The Internet

1. Credit & Financial Condition2. Sales Strength3. Product Lines4. Reputation5. Market Coverage6. Sales Performance7. Management Succession8. Management Ability9. Attitude10.Size

Possible Selection CriteriaPossible Selection Criteria77Objective 4:

Adapting Selection Adapting Selection CriteriaCriteria

77Objective 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 Securing Channel MembersMembers

77Objective 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 InducementsOffering Inducements77Objective 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 line2. Advertising & promotion3. Management assistance4. Fair dealing & friendly relationships

Product Line InducementsProduct Line Inducements77

• 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 Advertising & Promotion InducementsInducements

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• 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 Management Assistance as an Inducementas an Inducement

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• Management assistance inducements…

– Should highlight to prospective members where the channel manager will help with the following:

1. Training2. Financial analysis & planning3. Market analysis4. Inventory control5. Effective promotion (both methods & support)

Fair Dealing &Fair Dealing &Friendly RelationshipsFriendly Relationships

77Objective 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