Evaluating Channel Member Performance

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Chapter 14

• Evaluating Channel Member Performance

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Evaluating Member Performance
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Objective 1
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.

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Scope Frequency of Evaluations
Objective 2
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1. Degree of the manufacturers control
over channel members 2. Relative
importance of channel members 3. Nature of
the product 4. Number of channel members
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Degree of Control
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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
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Importance of Channel Members

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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 firms success in the market is
directly dependent on the channel members
performance
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Nature of the Product
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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
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Number of Channel Members
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Manufacturers who use intensive distribution
Manufacturers who use highly selective distributio
n

Channel member evaluation may be cursory
Channel member evaluation is comprehensive
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Evaluation versus Monitoring

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Objective 3

Performance Evaluation
Day-to-Day Monitoring

Overall performance reviews that give management
a complete objective analysis of each
distributors operations
Appraisals that assist management in
maintaining current operating control
of distributors efforts
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Performance Audit

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Objective 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

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Key Criteria for Performance Audit

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Objective 5

• 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

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Sales Performance
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Criteria channel manager should use to evaluate
sales data
3. Comparisons of the channel members
sales with predetermined quotas
1. Comparisons of the channel members
current sales to historical sales

2. Cross comparisons of a members sales
with those of other members
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Inventory Maintenance

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Key Criteria for evaluating member inventory
performance

• 1. Total level of channel members 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 members inventory control
• record-keeping system

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Selling Capabilities
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Manufacturer who obtains sales records for
channel members salespeople should examine the
following factors
1. Number of salespeople the channel
member assigns to manufacturers product line
3. Salesperson interest in manufacturers
products
2. Technical knowledge and competence of channel
members salespeople
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Attitudes of Channel Members



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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
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Competition







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Channel manager should consider two types of
competition

1. Competition from other intermediaries
2. Competition from other product lines carried
by the manufacturers own channel members
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General Growth Prospects



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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
• Members estimates of its own medium-
  long-range
• outlooks

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Applying Performance Criteria





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Objective 6

• 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
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Separate Performance Evaluations





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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
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Multiple Criteria Combined Informally





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Operational performance measures obtained
Managerial judgment used to combine performance
measures
Qualitative judgment made about overall channel
member performance
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Multiple Criteria Combined Formally
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• 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

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Recommending Corrective Actions
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Objective 7
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