LEARNING OBJECTIVES:

 To discuss the importance of channel member performance evaluation or measurement.

 To identify the 4 steps/process in the channel performance measurement.

Channel performance measurement is a key activity when a sales organization employs different
types of channel partners. In more complex multi-channel structures, it becomes even more
important due to the number of people, processes, and roles involved. The performance of a
channel can be measured across multiple dimensions. The parameters that are measured usually
are effectiveness, efficiency, productivity, equity and profitability of the channel.

The various channels have different purposes in the value chain; however, each task needs to
support the overall corporate goals. As the number of channel partner’s increases, it is difficult
to ensure that the channel partners are performing their specific roles as effectively as required.
For example, the goal of a business might be to increase the number of strategic accounts.
However, in order to gather maximum possible commission, channel partners might be engaged
in getting the maximum number of accounts possible with total disregard towards prioritizing
the acquisition of strategic accounts. It is therefore important to audit the channel partners and
incentivize them for activities that are aligned with the corporate goals. The channel performance
should also be judged on the ability to fulfill given tasks. A few carefully chosen metrics can give
a good indication of the performance of each channel.

The channel performance measurement is primarily a four-step process.

 Define the Sales Objectives

 Determine Channel Performance Metrics
 Set Channel Partner Targets
 Manage Channel Performance
1. Define Sales Objectives
The first step in channel performance measurement is to define the sales objectives for the
company. These objectives are outlined and discussed in sales meetings to ensure a shared
understanding between members of the marketing and sales teams.
2. Determine Channel Performance Metrics
Evaluating the performance of a distribution channel depends largely on the agreed upon
performance metrics. Choosing the right number and type of performance metrics can help to
monitor and improve the performance of channel partners. These metrics provide an
understanding of how well the channel partner is doing in reaching its performance targets.
Though it is possible to evaluate a channel on hundreds of performance metrics, this would make
reporting and analysis of the performance a cumbersome job. When determining channel
performance metrics, a key performance driver, such as sales or units sold, should be chosen to
identify and measure the most important tasks. A series of performance metrics are then decided
based on the key performance driver.
3. Set Channel Partner Targets
After overall sales objectives are defined, it is important to assign specific targets to each of the
channel partners to ensure they are in alignment with the overall objectives. Properly set targets
provide a benchmark to measure channel success, monitor performance, and take corrective
action to meet expectations. Each channel partner has a specific role towards fulfilling the overall
sales objectives. Performance targets should be set to reflect the channel partner’s contribution
to the overall objectives
4. Manage Channel Performance
This is the final step in channel performance measurement. It uses the agreed upon goals,
assigned performance targets, and identified performance metrics to manage channel
performance on an on-going basis and to identify the performance shortfalls of the channel
partners. During this step, management gains an understanding of the strengths and weaknesses
of each channel. Management can then take corrective action to ensure efficient performance
of the channel.
The success of a channel and its efficiency are determined by the efficiency of channel
intermediaries in delivering goods and services to customers and the quality of services offered
in the process. Developing a comprehensive marketing plan that provides clear and concise
direction about marketing activities and strategy is critical to the organization's success.

Quiz:
1. Channel members should be evaluated using all of the following criteria except which
one?
a. control
b. economic factors
c. adaptive criteria
d. channel leadership
e. none of the above
2. Marketing logistics involves getting the right product to the right customer in the right
place at the right time. Which one of the following is not included in this process?
a. planning the physical flow of goods and services
b. planning the flow of logistics information to meet customer requirements at
a profit
c. implementing the plan for the flow of goods and services
d. controlling the physical flow of goods, services, and information
e. gathering customer's ideas for new products
3. Smart companies coordinate their logistics strategies and forge strong partnerships with
suppliers and customers to improve customer service and reduce channel costs through
________.
a. cross-company teams
b. segregated departmentalization
c. cross-functional teams
d. partnering
e. cross-functional, cross-company teams