Chapter 7 Selecting the Channel Members. 7 Major Topics for Ch. 7 1.Channel Structure and Selection Issue** 2.Selection Process 3.Selection Criteria*

Chapter 7Chapter 7

Selecting the Channel Members

77Major Topics for Ch. 7

1. Channel Structure and Selection Issue**

2. Selection Process

3. Selection Criteria*

4. Offering Inducements**

1. Channel Structure and Selection Issue**

2. Selection Process

3. Selection Criteria*

4. Offering Inducements**

Channel Member SelectionChannel Member Selection 77

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

77Distribution Intensity & Distribution Intensity & SelectionSelection

Topic 1

The greater the intensity of distribution

The less the emphasis on qualification, screening, and selection

77Distribution Level & Distribution Level & SelectionSelection

The more the levels of distribution

The less control over selectionin lower levels from manufacturer

cf) Tiered Supply System in Auto Industry

77Ownership/Function & Ownership/Function & SelectionSelection

As more functions are performed by intermediaries

The more emphasis on qualification, screening, and selection

77The Selection ProcessThe Selection Process

1. Finding prospective channel members*

(Search)

1. Finding prospective channel members*

(Search)

3. Securing theprospective

channel membersas actual

channel members(Choice)

3. Securing theprospective

channel membersas actual

channel members(Choice)

2. Applying selection criteriato determine the

suitability of prospective

channel members(Qualification/Screening)

2. Applying selection criteriato determine the

suitability of prospective

channel members(Qualification/Screening)

Cf) OEM’s Supplier Selection: Two-step Process

Topic 2

77Finding MembersFinding Members

1. Field salesOrganization*

1. Field salesOrganization*

7. Other sources7. Other sources

5. Advertising5. Advertising

6. Trade shows*6. Trade shows*

2. Trade sources2. Trade sources

3. Reseller inquiries*3. Reseller inquiries*

4. Customers4. Customers

77Field Sales OrganizationField 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

Salespeople are the best positioned to

know about potentialintermediaries

BUT: BUT:

77Trade SourcesTrade 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

77Reseller InquiriesReseller Inquiries

Many firms learn about directinquiries from intermediaries

interested in handling their product.

Firms receiving the highest numberof inquiries are the more

prestigious in their industry.ResellerInquiries

ResellerInquiries

CustomersCustomers77

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.

=

77AdvertisingAdvertising

Trade magazine advertisingcan generate a large numberof inquiries from prospective

Members.

It therefore can provide a largepool from which to make selections.

77Trade ShowsTrade 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.

77Other SourcesOther 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

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

77 (Distributor) Selection (Distributor) Selection Criteria*Criteria*

Topic 3

• Credit & Financial Condition*

• Sales Strength• Product Lines• Reputation• Market Coverage

• Credit & Financial Condition*

• Sales Strength• Product Lines• Reputation• Market Coverage

• Sales Performance• Management

Succession• Management

Ability• Attitude*• Size

• Sales Performance• Management

Succession• Management

Ability• Attitude*• Size

17

• Channel Member Recruiting Issues* - Know Specific qualifications for success in this channel role.*

- Specify Precise products or channel assignment responsibility of channel members.*– The bounds of authority of the prospective

channel member. = Control Rights

– The way in which the role might be expected to change over time.

©McGraw-Hill Companies, Inc. 2002

18

Distributor Selection Criteria Used by Manufacturers (Descending Order)

• U. K. Firms– Knowledge of market

– Market coverage

– Enthusiasm for the product

– Number and quality of sales personnel

– Knowledge of the product

• U.S. Firms– Knowledge of the market

– Market coverage (tie)

– Previous success

– Number and quality of sales personnel

– Enthusiasm for the product

©McGraw-Hill Companies, Inc. 2002

Ex) Two Types of Channel Member Qualification: a) Qualification of Reseller’s Ability and

Motivationb) Qualification using general criteria and

qualification using special criteria

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• Screening Channel Member CandidatesGuidelines:

– Think about your target market segments.

– Level & type of support required by the channel member.

– Pick your distributor carefully* – weighing all factors; product, size, service, capability.

– Remember selling & distribution requirements change over time.

©McGraw-Hill Companies, Inc. 2002

Offering Inducements**Offering Inducements** 77Topic 4

1. Good, profitable product line*

2. Advertising & promotional support

3. Management assistance

4. Fair dealing policies & Friendly relationships

1. Good, profitable Product Line*1. Good, profitable Product Line* 77

Product line inducements:

1. Manufacturer offers good product line with strong sales & profit potential

2. Stress value of good product line fromchannel members’ perspectiveEx) VARs in IT channel

772. Advertising & Promotion2. Advertising & 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 advertising.

3. Management Assistance3. Management Assistance77

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:

4. Fair Dealing & 4. Fair Dealing & Friendly RelationshipFriendly Relationship

77

Manufacturer’s Responsibility:

To establish a good relationship based on trustand concern for their welfare as both businessentities and as people

My Research Findings

• Money

• Capability

Channel MemberCompliance

Incentives Outcome

26

Securing Channel Members for the Long Term*

• Assume responsibility for making intermediaries more effective:– Joint product development– Careful pricing & ordering policies– Shared training programs

• Equity/Justice– Procedural Justice– Distributive Justcie

©McGraw-Hill Companies, Inc. 2002