ch07.docx

1、ch07Chapter 7SELECTING THE CHANNEL MEMBERSTeaching Notes The focus of this chapter is the process of selecting the correct channel members (described as “strong”) who can perform the distribution tasks most efficiently. Emphasis should be placed on the delineation of the distribution tasks, prior ch

2、annel member selection, and on the human element of managing the individual channel members.This chapter continues the process started in Chapter 6 and explores the last phase of channel design selection. Chapter ObjectivesThe selection of channel members is the last (seventh) phase of channel desig

3、n. The selection process consists of three basic steps: (1) finding prospective channel members, (2) applying selection criteria to determine whether these members are suitable, and (3) securing prospective members for the channel.Each firm must develop its own list of criteria for channel members f

4、or its particular objectives and allow for flexibility for changes in policies and objectives. An important point to note is that channel members do not always “stand in line” to be selected by producers and manufacturers. Learning objectives1) Have an appreciation for the importance of channel memb

5、er selection.2) Understand the relationship between channel member selection and distribution intensity.3) Know the main sources for finding prospective channel members. 4) Be familiar with generalized lists of selection criteria.5) Recognize the need for adapting selection criteria to the needs of

6、particular firms. 6) Realize that channel member selection can be a two-way street.7) Appreciate the need to offer inducements to prospective channel members to secure them as actual channel members. 8) Recognize the human side of channel member selection and the role of fair and friendly relationsh

7、ips in channels.Chapter Topics1) Channel Member Selection and Channel Design 2) The Selection Process3) Finding Prospective Channel Members4) Applying Selection Criteria5) Securing the Channel MembersChapter OutlineChannel Member Selection and Channel DesignChannel selection decisions are frequently

8、 necessary even when channel structure changes have not been made. Firms may need additional outlets to allow for growth or to replace channel members that have left the channel. Channel design is presented as a decision faced by the marketer. As a general rule, the greater the intensity of distribu

9、tion, the less emphasis on selection.If a firms emphasis is to ensure intensive distribution, those intermediaries selected are often selected only on their basis of the probability of paying their bills. On the other hand, if channel structure stresses more selective distribution, the prospective m

10、embers should be much more carefully scrutinized and selection decisions become more critical.The Selection ProcessThree steps are involved:1. Finding prospective channel members2. Applying selection criteria to determine the suitability of prospective channel members3. Securing the prospective chan

11、nel members as actual channel membersFinding Prospective Channel MembersThe most important sources for finding channel members are listed below in their order of importance.1) Field sales organizations2) Trade sources3) Reseller inquiries4) Customers5) Advertising6) Trade shows7) Other sources1) Fie

12、ld Sales OrganizationsCompany salespeople are in the best position to know potential channel members, usually better than anyone else in the firm. Companies may not adequately reward salespeople for their efforts in finding potential channel members. 2) Trade SourcesTrade sources such as trade assoc

13、iations, trade publications, directories, trade shows, and the “grapevine” are all valuable sources of information about prospective members. Tables 7.1 and 7.2 provide listings of a number of wholesale and retail trade associations.3) Reseller InquiriesMany firms learn about potential channel membe

14、rs through direct inquiries from intermediaries handling their products. 4) CustomersCustomers of prospective intermediaries can be a source of information. Using informal or formal surveys of the views of customers, a firm may well be able to gain insights about the strengths and weaknesses of a pr

15、ospective channel member from the customers (end user) point of view.5) AdvertisingAdvertisements in trade publications offer another approach to finding channel members. Figure 7.1 shows an ad in Industrial Distribution for a line of industrial hoses. Figure 7.2 shows an ad for MAGLITE flashlights.

16、6) Trade ShowsTrade shows or conventions can be a very fruitful source for finding potential channel members. Many trade associations, at the industrial and retail levels, hold annual conventions at which numerous representatives from the various organizations are represented. 7) Other SourcesSome f

17、irms also find the following sources helpful in locating prospective members. a. Chamber of commerce, banks, and local real estate dealersb. Classified telephone directories or yellow pagesc. Direct-mail solicitationsd. Contacts from previous applicationse. Independent consultantsf. List brokers tha

18、t sell lists of names of businessesg. Business databasesh. The InternetApplying Selection CriteriaHaving developed a list of prospective channel members, the next step is to appraise these prospects in light of selection criteria. If a firm has not yet developed a set of criteria for selecting chann

19、el members, it must develop one. However, no list of criteria, no matter how carefully developed, is adequate for a firm under all conditions. 1) Generalized Lists of CriteriaBrendel developed a list of 20 key questions for industrial firms to ask their prospective channel members. This list of ques

20、tions is posed on page 231 of the text. You may want to open up the class for discussion at this point and see if class members can add any additional questions to this list or ask if this list is still applicable to today with the advent of the Internet. Hlavacek and McCuistion, argue that for tech

21、nical products sold in the industrial market, manufacturers should select distributors who carry a small rather than large array of products. They argue that with a smaller, rather than a larger, array of products carried more attention will be paid to a particular manufacturers product. They also a

22、rgue that the potential channel members market coverage should be specified as criteria for selection. Further, they believe that the financial capacity of the potential channel member should not be overemphasized because sometimes less financed firms are “hungrier” and more aggressive. Shipley repo

23、rts that there should be 12 criteria grouped under three basic categories: (1) sales and market factors, (2) product and service factors, and (3) risk and uncertainty factors.Table 7.3 shows these criteria by Shipley.Yeoh and Calantone identify six major categories of selection criteria:(1) commitme

24、nt level, (2) financial strength, (3) marketing skills, (4) product-related factors, (5) planning abilities, and (6) facilitating factors. These are referred to as “core competencies” that distributors must possess for effective representation in foreign markets.The most comprehensive and definitive

25、 list of channel member selection criteria is still that offered over three decades ago by Pegram. Ten of these are discussed briefly:A) Credit and Financial ConditionThe investigation of the credit and financial position of prospective intermediaries is vital.B) Sale StrengthNot only the quality of

26、 the salespeople but also the actual number of salespeople employed.C) Product LinesManufacturers were generally found to consider four aspects of the intermediarys product line: (1) competitive products, (2) compatible products, (3) complementary products, and (4) quality of the lines carried.1. Ma

27、nufacturers generally try to avoid intermediaries who carry directly competitive product lines. Many times both wholesale and retail intermediaries carry directly competitive products. 2. Manufacturers prefer intermediaries who handle compatible products. 3. Manufacturers look favorably on intermedi

28、aries who carry complementary products because they offer a better overall product mix to their customers.4. Manufacturers seek intermediaries that carry product lines that are equal to or better than their own lines. They do not want to be associated with “dog” lines if they can avoid it. D) Reputa

29、tionMost manufacturers will flatly eliminate prospective intermediaries who do not enjoy a good reputation in their community. For retail intermediaries, store image is an especially critical component of the retailers overall reputation.E) Market CoverageThe adequacy of the intermediary in covering

30、 the geographical territory that the manufacturer would like to reach is known as market coverage. Manufacturers will attempt to get the best territory coverage with a minimum of overlapping.F) Sales PerformanceThe main consideration here is whether the prospective intermediary can capture as much m

31、arket share as the manufacturer expects.G) Management SuccessionMany intermediaries are managed by the firms owner/founder and many are small businesses. Therefore, the continuity of management is a critical factor. H) Management AbilityMany manufacturers feel that a prospective channel member is no

32、t even worth considering if the quality of management is poor. One of the key determinants of managements ability is their ability to organize, train, and retain salespeople.I) AttitudeThis criterion applies mainly to a prospective intermediarys aggressiveness, enthusiasm, and initiative. These qualities are believed to be closely related to long-term success in handling the manufacturers product. J) SizeSometimes a prospective intermediary is judged