Selecting the Channel Members

1. Part 2: Developing the Marketing Channel Selecting the Channel Members

2. Channel member selection • Selection and distribution intensity • Finding members • Selection criteria • Adapting selection criteria • Who selects • Offering inducements • Fair dealing and friendly relationships

3. Channel Member Selection 1 Channel member selection – the 7th and final phase of channel design Selection may of may not be the result of channel design Channel member selection may be to replace channel members that have left… OR …to obtain greater coverage.

4. Selection & Distribution Intensity 2 The greater the intensity of distribution… …the less the emphasis on selection

5. The Selection Process Finding prospective channel members 2. Applying selection criteria to determine the suitability of prospective channel members 3. Securing the prospective channel members as actual channel members

6. Finding Members 3 1. Field sales organization 7. Other sources 2. Trade sources 6. Trade shows 3. Reseller inquiries 5. Advertising 4. Customers

7. The manufacturer must adequately reward salespeople for their time & effort establishing connections. Field Sales Organization Salespeople are the best positioned to know about potential intermediaries BUT: • They are often able to pick up information about likely intermediaries. • They may have lined up prospective intermediaries.

8. For Example: Industrial Distribution magazine The Verified Directory of Manufacturers’ Representatives The National Association of Wholesaler-Distributors The National Retail Federation The Encyclopedia of Associations Trade Sources • Trade associations • Trade publications • Directories • Trade shows • Firms selling similar products • The “grapevine”

9. Reseller Inquiries Many firms learn about direct inquiries from intermediaries interested in handling their product. Reseller Inquiries This is the main source of information about potential new channel members for some manufacturers. Firms receiving the highest number of inquiries are the more prestigious in their industry.

10. Customers Customers are willing to give frank opinions about the intermediaries who call on them. Manufacturer conducts formal or informal surveys of customers’ views of various distributors. = Manufacturer obtains information about potential intermediaries.

11. Advertising Trade magazine advertising can generate a large number of inquiries from prospective Members. It therefore can provide a large pool from which to make selections.

12. Trade Shows Wholesale and retail trade associations hold annual conventions. Attending manufacturers have access to a wide variety of potential channel members. Small manufacturers meet face-to-face with wholesalers & retailers.

13. Other Sources • Chambers of commerce, banks, & local real estate dealers • Classified telephone directories or the yellow pages • Direct-mail solicitations • Contacts from previous applications • Independent consultations • List brokers that sell lists of names of businesses • Business databases • The Internet

14. Sales Performance Management Succession Management Ability Attitude Size Selection Criteria 4 • Credit & Financial Condition • Sales Strength • Product Lines • Reputation • Market Coverage

15. Adapting Selection Criteria 5 Because no list of criteria is adequate for a firm under all conditions… …the channel manager should be flexible when using selection criteria.

16. Who Selects? 6 Who does the selecting? • Producers & Manufacturers • Wholesale Intermediaries • Retail Intermediaries

17. Securing Channel Members . . . The supplier produces, the distributor sells, and each is dependent upon the other. Together they form a team, and teamwork is essential if the association is to prove mutually beneficial. — Pegram

18. Offering Inducements 7 Advertising & promotional support Management assistance Fair dealing policies & Friendly relationships

19. Product Line Product Line Inducements: Manufacturer offers good product line with strong sales & profit potential 2. Stress value of good product line from channel members’ perspective

20. Advertising & Promotion Advertising & Promotion Inducements Consumer Market: Gain immediate credibility by using a strong program of national advertising. Industrial Market: Gain recognition by using a strong program of trade paper advertising.

21. Management Assistance Management Assistance Inducements: Prospective members want to know whether the manufacturer will help with the following: • training programs • financial analysis & planning • market analysis • inventory control procedures • promotional methods

22. Fair Dealing & Friendly Relationship 8 Manufacturer’s Responsibility: To convey to prospective channel members that he or she is genuinely interested in establishing a good relationship based on trust and concern for their welfare as both business entities and as people

23. Discussion Question #1 Apple, with its almost 300 company-owned stores, uses independent intermediaries, which it refers to as “third-party resellers.” For its Mac computers, Apple is very careful about the intermediaries it selects to become members of its distribution channel. Once selected, Apple makes a substantial investment to enhance the capabilities of its chosen channel members to sell and service Apple products. Its “Apple Sales Consultant Program,” for example, places Apple employees at selected channel members’ stores to provide expertise on how to tell the Apple story and ensure a high-quality buying experience. The company also offers extensive training and support through what it refers to as its “Apple Premium Resellers Program” to selected channel members to help them develop high levels of customer service and product expertise. Apple strongly believes that providing high-quality sales and after-sales support is critical for attracting new customers and retaining existing ones. Do you think Apple’s careful selection of channel members and its efforts to enable them to provide high-quality sales and service support are as important as Apple’s unique products in creating a differential advantage for Apple?

24. Discussion Question #3 The Rust-Oleum Corporation is world-renowned for its anticorrosive coatings for virtually any application, for use on everything from heavy industrial equipment to consumer patio furniture. The company sells its industrial products through wholesalers (industrial distributors) and its consumer products through both wholesalers and retailers. Rust-Oleum has, for many years, talked about doing business with its channel members by the golden rule—“doing business together with sincerity, honesty and cooperation.” The company is also fairly selective in its choice of distributors, limiting the number selected to the fewest possible needed to provide effective coverage of each market. In addition, Rust-Oleum makes it a point to say that it sells through the distributor, not just to him. Given this approach to dealing with channel members, what criteria do you believe would be especially important for Rust-Oleum Corporation to emphasize in selecting prospective channel members?

25. Discussion Question #6 Master Lock is perhaps the nation’s best-known name in padlocks. Master Lock padlocks are sold intensively at the retail level through a wide range of stores, including hardware stores, home centers, automotive stores, bicycle shops (for bicycle padlocks), drugstores, supermarkets and many others. This wide retail network is supplied largely through wholesalers. Master Lock relies on wholesalers to provide the bulk of the sales and logistical support to the retail channel members. When retailers need help in ordering, stocking the right assortment, choosing point-of-purchase displays or advertising to consumers, Master Lock tells them to “ask your Master Lock distributor for all the advice and support you need.” Given that Master Lock expects its wholesale distributors to provide virtually all the support needed by retailers, what kind of support do you think the wholesaler distributors should expect from Master Lock?