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Selection and Appointment of channel members
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Channel Member Selection
Selection may or may not be the result of channel design.
The last phase of channel design
Firm may need additional outlets to allow for growth
To replace channel members that have left
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Selection & Distribution Intensity
The greater the intensity of distribution
The less the emphasis on selection
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The Selection Process
1. Finding prospective channel members
3. Securing theprospective
channel membersas actual
channel members
2. Applying selection criteriato determine the
suitability of prospective
channel members
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Finding Members
1. Field salesorganization
7. Other sources
5. Advertising
6. Trade shows
2. Trade sources
3. Reseller inquiries
4. Customers
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Field Sales Organization
• They are often able to pick up information about likely intermediaries.
• They may have lined up prospective intermediaries.
• The manufacturer must adequately reward salespeople for their time & effort establishing connections.
Salespeople are the best positioned to
know about potentialintermediaries
BUT:
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Trade Sources
• Trade associations• Trade publications• Directories• Trade shows• Firms selling similar
products• The “grapevine”
For Example:• Industrial Distribution
magazine• The Verified Directory of
Manufacturers’ Representatives
• The National Association of Wholesaler-Distributors
• The National Retail Federation
• The Encyclopedia of Associations
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Reseller Inquiries
Many firms learn about directinquiries from intermediaries
interested in handling their product.
This is the main source of information about potential new channel
members for some manufacturers.
Firms receiving the highest numberof inquiries are the more
prestigious in their industry.
ResellerInquiries
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Customers
Customers are willing to give frank opinionsabout the intermediaries who call on them.
Manufacturer conducts formal or informal surveys ofcustomers’ views of various distributors.
Manufacturer obtains information aboutpotential intermediaries.
=
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Trade Shows
Wholesale and retail trade associations hold annual conventions.
Attending manufacturers have access to awide variety of potential channel members.
** Small manufacturers meet face-to-face withwholesalers & retailers.
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Other Sources
1. Chambers of commerce, banks, & local real estate dealers
2. Classified telephone directories or the yellow pages3. Direct-mail solicitations4. Contacts from previous applications5. Independent consultations6. List brokers that sell lists of names of businesses7. Business databases8. The Internet
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Selection Criteria
• Credit & Financial Condition• Sales Strength• Product Lines• Reputation• Market Coverage
• Sales Performance• Management Succession• Management Ability• Attitude• Size
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Adapting Selection Criteria
Because no list of criteria is adequatefor a firm under all conditions,
the channel manager should be flexible when using selection criteria.
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Who Selects?
Who does the selecting?
Producers & Manufacturers
Wholesale Intermediaries
Retail Intermediaries
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Offering Inducements
Good, profitable product line
Advertising & promotional support
Management assistance
Fair dealing policies & Friendly relationships
Securing Channel Members
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Product Line7
Product line inducements:
1. Manufacturer offers good product line withstrong sales & profit potential
2. Stress value of good product line fromchannel members’ perspective
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7Advertising & Promotion
Consumer Market:Gain immediate credibility by using a strong program
of national advertising.
Advertising & promotion inducements
Industrial Market:Gain recognition by using a strong program of
trade paper advertising.
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Management Assistance7
Prospective members want to know whether the Manufacturer will help with the following:
• training programs• financial analysis & planning
• market analysis• inventory control procedures
• promotional methods
Management assistance inducements:
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Fair Dealing & Friendly Relationship
Manufacturer’s Responsibility:
To convey to prospective channel members thathe or she is genuinely interested in
establishing a good relationship based on trustand concern for their welfare as both business
Entities and as people
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Channel structure and selection of channel members
Consumer Non-Durable Product: P&G
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Channel Structure
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Selection criteria for Stockists:
1. Investment capacity2. Storage space3. Location4. Span of control5. Market knowledge6. Infrastructure7. Support to the organization8. Orientation / Trustworthiness
Selection criteria for wholesalers:
1. Reliability2. Loyalty3. Ability to service retailers4. Willingness to work with stockist5. Other brands kept6. Other related products7. Delivery time8. Reach capacity9. Tendency to diversify
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Channel structure and selection of channel members
Consumer Durable Product: Godrej and Boyce (G&B)
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Channel Structure of G&B
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Selection criteria for Dealers:
1. Prior business record2. The capability of maintaining and running his own showroom.3. Financial strength4. Inventory5. Contracts with customers6. Availability of salesforce and technicians
The appointment letter lays down several terms of the contract that have to be fulfilled by the dealer. The company expects the dealers not to sell any competitors’ products. The dealer is also expected to conduct his business only within the clearly demarcated sales territory allocated to him by the company. According to the Monopolies and Restrictive Trade Practices Act, a company cannot officially restrict the dealer to operate within a specific territory. The laws say that a retailer may not be prevented from selling his products in any territory he wishes. Hence, no such condition is explicitly laid down in the appointment contract. Territory demarcation is worked out by considering the size of the area or district as well as the sales potential of the region in terms of the number of offices, purchasing power of the domestic consumers,etc.
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Maruti Udyog Ltd
Analyze requirement of a dealer
Pinpoint Geographical Location
Identify the kind of industries exist in that belt
Interaction with the other automobile dealer to analyze viability: Data Collection
Interaction with the opinion leaders to analyze viability: Data Collection
Now the choice is between : an existing dealer or a new one.
Selection of Dealers: background check / infrastructure / managerial resources / financial strength
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Crompton Graves
The manufacturing units of Crompton Graves for pumps and motors are situated at Sewri atMumbai and at Ahmednagar. The goods are supplied directly to the stock points at every Branch. The flow of products is from the company-owned stock points at the branch level toThe exclusive dealers.
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Selection Procedure for Dealers1. The company does not advertise for new dealers. Whenever the need to appoint a new dealer for an area is felt, the word is spread around. This is done as the type of dealers who sell pumps and motors are mostly concentrated in one locality in every town or city.
2. The interested dealers are asked to make a presentation before the Branch Manager and the Group Marketing Manager as to how they would be able to serve Crompton.
3. The selection is then done on the basis of the following criteria:
• Financial strength: The capability of the dealer to hold sufficient stock as per the potential of the area both at present and in the future. Also, whether he/she would be able to pay the company’s dues on time.
• Workforce: The strength of the workforce for handling sales, delivery, stores handling, after-sales service, and so on. The quality of the workforce in terms of educational qualifications, technical competency and experience is also seen.
• Contacts: As the business for these types of products is done on the basis of contacts, contacts form a major basis for selection and include the present customers of the dealers, their experience in dealing with such customers and their overall contacts in the society.
• Floor space: Depending on the quantity of products to be stocked for the targeted sales, the floor space of the godown should be sufficient and located close to the market.
4. Feedback from the market is obtained through the Marketing Engineer network and the present dealer network. The feedback is sought for things like authenticity of the claims and the reputation of the person to be appointed.
5. An appointment is given to the selected dealers after they provide a security deposit. Every dealer is required to make a deposit with the company, which roughly works out to around three months of expected sales.
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Grouping of Selection Criteria