Pre-Test (Pair work)

1. Pre-Test (Pair work) • Explain scope & frequency of channel member performance evaluations. • What is channel member performance audit? Explain 3 phases of the audit. • Explain the criteria can be used to evaluate channel member performance. • Explain 3 approaches in applying evaluation criteria.

2. Chapter 14 Evaluating Channel Member Performance

3. Factors Affecting Scope & Frequency of Channel Performance Evaluations 14 1. Degree of the manufacturer’s control over channel members 2. Relative importance of channel members 3. Nature of the product 4. Number of channel members (channel intensity)

4. 1. Degree of Control 14 Control that a producer, manufacturer, or franchisor has over members is based on strong contractual agreements Manufacturer lacks strong market acceptance for its products & strong channel control based on contractual commitments Channel manager can demand a great dealof information on member operations Manufacturer can exert little control over channel members

5. 2. Importance of Channel Members 14 Evaluation of channel members is more comprehensive for manufacturers who sell all of their output through intermediaries Why? Because the firm’s success in the market is directly dependent on the channel members’ performance

6. 3. Nature of the Product 14 The more complex the product, the broader the scope of evaluation + For products of very high unit value, the gain or loss of a single order is important to the manufacturer

7. 4. Number of Channel Members 14 Manufacturers who use intensive distribution Manufacturers who use highly selective distribution Channel member evaluation may be cursory Channel member evaluation is comprehensive

8. Performance Evaluation versus Monitoring 14 Performance Evaluation Day-to-Day Monitoring Overall performance reviews that give management a complete & objective analysisof distributor operations Appraisals that assist management in maintaining current operating controlof distributors’ efforts (such as sales criteria)

9. Channel Performance Audit 14 Three Phases of Channel Performance Audit Developing evaluation criteria Channel goals Periodically evaluating the performance against the criteria Recommending corrective actions

10. I. Key Criteria for Channel Performance Audit 14 • Sales performance of channel members • Inventory maintenance of channel members • Selling/Service capabilities of channel members • Attitudes of channel members • Competition faced by channel members • General growth prospects of channel members

11. 1. Sales Performance 14 Criteria channel manager should use to evaluate sales data: 3. Comparisons of the channel member’s sales with predetermined quotas set by manufacturer 1. Comparisons of the channel member’s current sales to historical sales 2. Cross comparisons of a member’s sales with those of other members

12. 2. Inventory Maintenance 14 Key Criteria for evaluating member inventory performance: 1. Total level of channel member’s inventory 2. Shelf /floor space devoted to inventory 3. Shelf /floor space relative to competitors’ inventory Breakdown by particular products in units & dollars Comparison of figures with channel members’ estimated purchases of related & competitive lines Condition of inventory & inventory facilities Amount of old stock & efforts made to move it Adequacy of channel member’s inventory control & record-keeping system

13. 3. Selling Capabilities 14 Manufacturer who obtains sales records for channel members’ salespeople should examine the following factors: 1. Number of salespeople the channel member assigns to manufacturer’s product line 3. Salesperson interest in manufacturer’s products 2. Technical knowledge and competence of channel member’s salespeople

14. 4. Attitudes of Channel Members 4 Attitudes Not usually evaluated unless sales performance is unsatisfactory Attitudinal problems are often addressed after they have contributed to poor performance Should be evaluated independently of sales data

15. 5. Competition 14 Channel manager should consider two types of competition: 1. Competition from other Intermediaries (Inter-store) 2. Competition from other product lines carried by the manufacturer’s own channel members (Within-Store)

16. 6. General Growth Prospects 14 Key issues for evaluating channel member growth prospects: Past performance Overall performance Expansion or improvement of organization Level of growth and qualification in personnel Management, age, health, or succession arrangements Adaptability & overall capacity to meet market expansions Member’s estimates of its own medium- & long-range outlooks

17. Other Criteria 14 Other criteria are also used in some cases: Financial status of channel members (i.e. have been paying their bills promptly?) Their character and reputation (i.e. any change in ownership or change in operating policies?) The quality of service offered by channel members to their customers. (i.e. service level is inadequate?)

18. II. Applying Evaluation Criteria 14 Separate performance evaluations on one or more criteria 2. Multiple criteria combined informally to evaluate overall performance qualitatively Three Approaches 3. Multiple criteria combined formally to arrive at a quantitative index of overall performance

19. 1. Separate Performance Evaluations 14 Commonly used when the number of channel members is very large & when criteria are limited to no more than sales performance, inventory maintenance, & possible selling capabilities (See more in Table 14.5)

20. 2. Multiple Criteria Combined Informally 14 Operational performance measures obtained Managerial judgment used to combine performance measures Qualitative judgment made about overall channel member performance

21. 3. Multiple Criteria Combined Formally 14 5 Steps Criteria & associated operational measures are decided on Weights assigned to each of the criteria* Each member evaluated is rated on each of the criteria Score on each criterion multiplied by weight for that criterion Weighted criterion ratings summed to yield overall performance rating for each member (*See more in Table 14.6)

22. III. Recommending Corrective Actions 14 Channel manager should attempt to find out why members have performed poorly  Correction and enforcement Develop concrete & practical approaches to actively seek information on member needs and problems Programs of member support must be congruent with member needs & problems Manufacturer must exercise leadership through the skillful use of power (avoid to use coercive power) Constraints imposed by interorganizational setting of marketing channel must be understood

23. Final Examination Guideline Final Exam = 25 marks • Chapter 5,6,7,8,9,14:Fill in the blanks (with choices) 15 marks • Chapter 7, 9, and 14:Short answer questions 10 marks