Motivating the Channel

Members
FMS
 Channel Management

• Can be defined as the administration of

existing channels to secure the cooperation of
channel members in achieving the firm’s
distribution objectives.
 Channel Management
• Deals with existing channels – assuming that the
channel structure has already been designed and that all
members selected

• Secure the co-operation of channel members –

administrative actions necessary to secure their co-
operation

• Distribution objective – distribution component of

marketing mix is expected to play in achieving the firm’s
overall marketing objectives
 Motivation Management

• Three basic facts :

– Finding out the needs and problems of channel

members
– Offering support to the channel members that is
consistent with their needs and problems
– Providing leadership through the effective use of
power
Needs and Problems of Channel
Members

• An attempt must be made to learn

what the members want from the
channel relationship
 Needs and Problems of Channel
Members
• Middleman

– Does not consider himself a hired link in a chain forged by

manufacturer

– Acts first and foremost as a purchasing agent and only

secondarily as a selling agent

– Directs his selling efforts at obtaining orders for assortment rather

than individual items

– Unless given some incentive, will not maintain separate sales

records by brands sold
Approaches for learning about Channel
Member Needs and Problems

• Research studies of channel members

conducted by the manufacturer

• Research studies by outside parties

• Marketing channel audits

• Distributor advisory councils

 Research studies of channel
members
• Conducted to learn the

– Kind of products customers want

– Brand preferences
– Shopping behaviour etc

Conducting research is the only way to uncover subtle or

hidden channel members needs or problems.
Research Studies by outside parties

• Necessary to get complete and unbiased data on

channel member needs and problems

• Research provides higher assurance of

objectivity

• Offer a level of expertise

 Marketing Channel Audits
• Pricing Policies, margins and allowances
• Extent and nature of product line
• New products and their marketing development through promotion
• Servicing policies and procedures such as invoicing, order dating,
shipping, warehousing and others
• Sales force performance in servicing the accounts
• Identify and define in detail the wholesaler – manufacturer –
retailer relationship.
• Cross referencing
• To be done on a periodic and regular basis to capture trends and
patterns.
 Distributor Advisory Council

• Provides recognition for the Channel Members

• Provides a vehicle for identify and discussing mutual

needs and problems

• Results in overall improvement of channel

communications
Offering support to Channel Members

• Co-operative Arrangements

• Partnership or strategic alliance

• Distribution programming
 Co-operative Arrangements
• Underlying rationale is to provide incentives
for getting extra effort from channel
members in the promotion of the products of
the manufacturer.

• Should :
– Focus on channel member needs and problems
– Be simple and straightforward
– Convey a clear sense of mutual benefit
Partnerships and Strategic Alliances

• A continuing and mutually supportive

relationship between the manufacturer and its
channel members in an effort to provide a
more highly motivated team, network or
alliance of channel partners.
 Partnerships and Strategic Alliances
• Basic phases in the development of a ‘partnership’
arrangement between channel members :

– Explicit statement of policies to be made by manufacturers in

such areas as product availability, technical support, pricing and
any other relevant area

– Assessment of all existing distributors capabilities for fulfilling

their roles

– Manufacturer should continually appraise the appropriateness of

the policies
 Distribution Programming

• Defined as a comprehensive set of policies for

the promotion of a product through the channel
 Frame of Reference for Distribution
Programming
• Manufacturer’s Marketing Goals :
– Corporate capability
– Competition
– Demand
– Cost-volume relationships
– Legal considerations
– Reseller capability in terms of :
• Sales
• Market share
• Contribution to overhead
• Rate of return on investment
• Customer attitude, preferences and ‘readiness to buy’ indices
Frame of Reference for Distribution
Programming
• Manufacturer’s Channel Requirements

– Coverage ratio
– Amount and location of display space
– Level and composition of inventory investment
– Service capability and standards
– Advertising, sales promotion and personal selling support
– Market development activities
 Frame of Reference for Distribution
Programming
• Retailer’s Requirements :

– Managerial aspirations
– Trade preferences
– Financial goals :
• Rate of inventory turnover
• Rate of return on investment
• Gross margin
• Contribution to overhead
• Gross margin and contribution to overhead per rupee invested
• Gross margin and contribution to overhead per unit of space
Frame of Reference for Distribution
Programming

• Distribution policies :

– Price concessions
– Financial assistance
– Protective provisions
Providing Leadership to Motivate
Channel Members

• Control must be exercised through

effective leadership on a continuing basis
to attain a well motivated team of
channel members.
 Providing Leadership to Motivate
Channel Members

• Problems in achieving very high level of control and

leadership in interorganisational setting are :

– Looseness of the organisation of many channel systems

– Proclivity by channel members to avoid central direction
– Lack of single ownership
– No clear demarcation of a superior-subordinate relationship