MOTIVATING THE CHANNEL

MEMBERS

BY: Shwetanshu Gupta

MBA-49-2013

MARKETING CHANNEL:

Marketing channel/ trade channel/ distribution channel are

sets of independent organizations involved in the process of
making a product/service available for use or consumption.
They are a set of pathways a product/service follows after
production culminating in purchase and use by the final
end user.

CHANNEL MEMBERS

Channel members are the people or intermediaries

through which goods and services go through before they
reach the consumer.
Intermediaries can be wholesalers, retailers, brokers,
sales agent etc.

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Retailer

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IMPORTANCE OF CHANNEL MEMBERS

Intermediaries can provide economies by reducing the

amount of work that must be done by both producers and
consumers.
Intermediaries transforms the assortments of products made
by producers into assortments wanted by consumers.
In making products and services available to consumers ,
channel members add value by bridging the major time, place
and possession gaps that separate goods and services from
those who use them.

Intermediaries help producers complete transaction

by:
Information: gathering and distributing marketing
research and intelligence information needed for planning
and aiding exchange.

Promotion: developing and spreading persuasive

communications about an offer.
Contact: finding and communicating with prospective buyer.
Matching: shaping and fitting the offer to the buyers needs
including activities such as manufacturing, assembling,
grading and packaging.
Negotiation: reaching an agreement on price.

Intermediaries help producers fulfill transaction by:

Physical distribution: transporting and storing goods.

Financing: acquiring and using funds to cover the costs of

the channel work.
Risk taking: assuming the risk of carrying out the channel
work.

MOTIVATING THE CHANNEL MEMBERS

Companys now a days view its intermediaries in the same

way it views its end users.
To be able to stimulate channel members to top
performance, it is necessary to understand their needs and
wants and for this purpose it is necessary to motivate the
channel members.
Motivating the channel members means: taking such
actions that foster channel member cooperation in
implementing the manufacturers distribution objectives
beyond compliance active representation of products.

It includes:
finding out needs and problems of channel
members.

offering support to the channel members that

matches with their needs and problems.
Providing leadership through the effective use of
power.

MEANS TO MOTIVATE CHANNEL MEMBERS*

Cooperative Arrangements
Intermittent interactions between manufacturer
& channel members
Partnerships & Strategic Alliances
Continuing & mutually supportive relationship
Distribution Programming
Deals with virtually all aspects of the
channel relationship

COOPERATIVE ARRANGEMENTS
-

Focuses on channel member needs & problems

Simple & straightforward
Conveys a clear sense of mutual benefit
It includes:
Cooperative advertising allowances
Payments for interior displays
Contests for buyers, salespeople, etc.
Allowances for warehousing functions
Payments for window display space
Detail men who check inventory
Demonstrators
Coupon-handling allowance
Free goods

PARTNERSHIPS & STRATEGIC ALLIANCES*

-Focus on a continuing and mutually supportive relationship
between the manufacturer and its channel members.
Three basic phases
1. Manufacturer should make explicit statement of
policies in areas such as product availability,
technical support, pricing, etc.
2. Manufacturer should assess all existing distributors
as to their capabilities for fulfilling their roles
3. Manufacturer should continually appraise the
appropriateness of the policies guiding his
or her relationship with the channel members

DISTRIBUTION PROGRAMMING*
A comprehensive set of policies for the promotion of a
product through the channel.
Developed as a joint effort between the manufacturer and
the channel members to incorporate the needs of both.
Steps for developing a program:
1. Analysis of marketing objectives & the kinds of levels of
support needed from channel members
Ascertains channel members needs &
problem areas
2. Formulate specific channel policies that offer:
Price concessions to channel members
Financial advice
Some kind of protection for channel members

CHANNEL POWER:
It is defined as the ability to alter channel members behavior
so that they take actions they would not have taken
otherwise.
Following type of power can be drawn by manufacturer to
elicit cooperation:

COERCIVE POWER

A manufacturer threatens to withdraw a resource or terminate

a relationship if intermediaries fail to cooperate.
This power can be effective but its exercise produces
resentment and can generate conflict and can lead the
intermediaries to organize countervailing power.

REWARD POWER
The manufacturer offers intermediaries an extra benefit for
performing specific acts or functions.
It typically produces better results than coercive power , but
can be overrated.
Intermediaries may come to expect a reward every time the
manufacturer wants a certain behavior to occur.

LEGITIMATE POWER

The manufacturer requires a behavior that is warranted

under the contract.
As long as intermediaries view the manufacturer as a
legitimate leader, legitimate power works

EXPERT POWER

The manufacturer has special knowledge that the

intermediaries value.
However when expertise pass on to intermediaries this power
weakens.

REFERENT POWER

The manufacturer is so highly respected that intermediaries

are proud to be associated with it.
Companies such as IBM, Caterpillar and HP(HewlettPackard) have high referent power

IMPORTANCE OF MOTIVATING CHANNEL MEMBERS

BUILD PREFERENCE FOR BRANDS

Motivational tools helps to ensure that channel members

give preference to companys product over competitors
product
Motivation plays an important role in winning channel
members mind share.
By winning mind share, channel member recommend or
actively promote companys product over competitors
product

ADD VALUE TO PRODUCT OFFER

Motivating intermediaries is an important strategy for

influencing channel members behavior.
Offering training programs or marketing support to
members add value to the relationship between supplier
and channel by helping them to improve their
performance and grow their own business.
A strong relationship makes it easier to launch new
products or marketing campaigns through the channel,
helping to build revenue and profits.

INCREASE SALES THROUGH THE CHANNEL

Financial incentives are an important source of

motivation to channel members.
By offering discounts , on purchases above an agreed level
channel members can be encouraged to stock or sell more
products.
Financial incentives helps in launching new products,
increase sales of existing products and widen distribution
base.

IMPROVE PERFORMANCE

Motivation helps channel member to improve their

performance.
Offering them different bonus or discount levels,
marketing and training support, performance level can be
enhanced.