Evaluating channel member performance

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Evaluating channel member performance

• Module 9
• Chapter 14

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Lecture overview

• Purpose of evaluating channel performance
• Factors that affect the scope and frequency of
  evaluations
• Types of channel evaluation
• Marketing channel audit
• Evaluation criteria
• Four basic dimensions
• Six common criteria
• Quantitative v qualitative criteria

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• Three approaches to applying performance criteria
• Taking corrective action

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Why is channel member performance evaluated?

• Are distribution objectives being met?
• Are distribution tasks being performed
  effectively?
• Are required customer service requirement being
  met?
• Are channel members efficient and profitable?
• Are any corrective actions required?

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Scope and frequency of channel evaluation

• Scope what is evaluated?
• Frequency how often it is evaluated?
• Factors include
• Degree of manufacturer control
• Importance of channel members
• Nature of the product
• Number of channel members

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Degree of manufacturer control

• Control can be attained through contracts,
  ownership or various forms of power.
• If high, then greater scope and frequency of
  evaluation can be demanded

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Importance of channel members

• How critical is the channel member to the
  manufacturers success?
• How easily can the relationship be terminated or
  alternative distribution be attained?
• If high, then greater scope and frequency of
  evaluation

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Nature of the product

• If expensive (high unit value) or complex, then
  the greater the scope and frequency of
  evaluations
• If expensive, one lost sale can be critical

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Number of channel members

• Intensity of distribution
• Exclusive and selective arrangements mean that
  channel members are more critical for success
• If high, narrower scope and frequency of
  evaluations

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Types of channel evaluation

• Day to day monitoring of sales
• Scanning data
• Marketing channel audit
• A periodic and comprehensive review of channel
  member performance (p. 430)
• usually conducted on an annual basis
• Framework for channel audit
• Table 9.4, p. 9.9 - 9.11 (study guide)

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Audit issues

• Channel structure
• Relationships
• Customer service
• Physical distribution
• Marketing research and information systems
• Product

• Pricing
• Promotion
• Technology
• Specific issues
• Services
• International markets

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Three steps in conducting a channel performance
audit

• Refer to table 14.1, p. 431
• 1. What will we measure criteria?
• 2. Measurement and evaluation against benchmarks
• 3. Take corrective action if required

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Measuring channel performance four key dimensions

• 1. Effectiveness
• task performance
• service delivery
• achieving distribution objectives
• total quality management
• 2. Equity
• how well the channel services disadvantaged
  market segments

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• 3. Productivity
• physical efficiency output/input
• inputs
• labour, equipment, facilities, capital,
  management expertise
• outputs
• task performance, service, sales
• 4. Profitability
• financial efficiency
• ROI, profits

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Criteria used for evaluating channel member
performance includes.

• Sales performance
• past sales
• channel by channel
• sales quota
• Inventory maintenance
• Table 14.2, p. 435
• Levels, floor or shelf space, by product,
  condition of stock, age of stock, inventory
  control systems and processes etc.

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• Selling capabilities
• Number of sales people
• Product knowledge and expertise
• Effort and level of support
• Attitudes of channel members towards the
  product/brand
• Competition
• Performance relative to other channel members

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• General growth prospects
• Table 14.3, p. 438
• performance
• financial status
• character and reputation
• service quality
• objectives
• ability to adapt
• resources etc.

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• Other quantitative and qualitative measures
• refer to tables 9.1 and 9.2 (study guide)
• outcome based and behaviour based
• refer to table 15-1 and 15-2, (text pp. 641-2)
• Refer to table 9.3, p. 9.8 (study guide)
• measuring reseller performance

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Applying performance criteria

• Separate performance evaluations
• Multiple criteria combined informally
• Multiple criteria combined formally

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Separate performance evaluations

• refer to table 14.1, p. 439
• based on one or two key criteria
• e.g. sales, inventory maintenance
• used for large and intensive channel systems
• simple and fast
• not combined not an index
• provides little insight of overall performance

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Multiple criteria combined informally

• refer to figure 14.1, p. 440
• criteria are combined to arrive at an overall
  measure of performance
• informal and qualitative
• no weighting or ranking etc.
• simple and flexible
• does not reflect relative importance of criteria
• subjective and does not permit relevant
  comparisons across channel members

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Multiple criteria combined formally

• Multiple criteria are combined to arrive at a
  quantitative measure of overall performance
• Refer to table 14.5 and table 14.6 , pp. 441-3
• criteria are weighted
• channel member is rated on each criteria
• weighted scores are calculated (w x r)
• weighted scores are summed to arrive at overall
  performance score
• Allows comparisons by channel member refer to
  table 14.7, p. 443

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Taking corrective actions

• Identify underperformers
• Less profitable
• Less efficient
• Determine cause of the problem
• Why might some channel members be less
  profitable?
• Why might some channel members be less efficient?
• What are the needs and problems of channel
  members?

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Taking corrective action

• Develop programs that address the cause of the
  problem
• tailored to the needs of individual channel
  members
• avoid use of coercive power

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Summary

• Purpose of evaluating channel performance
• Factors that affect the scope and frequency of
  evaluations
• Types of channel evaluation
• Marketing channel audit
• Evaluation criteria
• Four basic dimensions
• Six common criteria
• Three approaches to applying performance criteria
• Taking corrective action

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Tutorial program

• Case 16 Hyde-Phillip Chemical Company, pp.
  604-6
• Review question 1, but change scope of question
  to approach of evaluation of sales
  respresentation
• Activity 9.3
• Selected reading 9.1
• Activity 9.6, p. 427