Chapter 14Major Topics for Ch. 14What is Channel Performance?*Scope & Frequency of Channel Performance Evaluations Depend on*1. Degree of Control2. Importance of Channel Members3. Nature of the Product4. Number of Channel MembersPerformance Evaluation versus MonitoringChannel Performance Audit*I. Key Criteria for Channel Performance Audit*1. Sales Performance2. Inventory Maintenance3. Selling Capabilities4. Attitudes of Channel Members5. Competition6. General Growth ProspectsII. Applying Evaluation Criteria1. Separate Performance Evaluations2. Multiple Criteria Combined Informally3. Multiple Criteria Combined FormallyIII. Recommending Corrective ActionsDimensions of (Micro) Channel Member Performance*Measures of Channel Member Financial PerformanceSlide 25The Strategic Profit ModelChapter 14Chapter 14Evaluating Channel Performance1414Major Topics for Ch. 14•What is Channel Performance?*•Scope and Frequency of Performance Evaluations*• Channel Performance Audit•Key Criteria for Performance Audit*•Applying Evaluation Criteria•Recommending Corrective Actions•Extra Topic: Micro Channel Performance*1414What is Channel Performance?*I. Channel Performance: The extent to which the channel members meet the desired channel goals.II. Dimensions of (Macro) Channel Performancea) Efficiency: Productivity; Profitabilityb) Effectiveness: Stimulation of New Demand (ex: online channel); Customer Satisfaction (ex: Walk in clinic)c) Equity: Easy Access and OpportunityEx) U.S. versus Japan; L.A. and Indian Reservation1414Scope & Frequency of Scope & Frequency of Channel Performance Evaluations Channel Performance Evaluations DependDepend on* on* 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) 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)14141. Degree of Control1. Degree of ControlControl that a producer,manufacturer, or franchisor hasover members is based onstrong contractual agreementsControl that a producer,manufacturer, or franchisor hasover members is based onstrong contractual agreementsChannel managercan demand a great deal ofinformation on memberoperationsChannel managercan demand a great deal ofinformation on memberoperationsManufacturer lacksstrong market acceptancefor its products & strongchannel control based oncontractual commitmentsManufacturer lacksstrong market acceptancefor its products & strongchannel control based oncontractual commitmentsManufacturercan exert little controlover channel membersManufacturercan exert little controlover channel members14142. Importance of Channel Members2. Importance of Channel MembersEvaluation of channel members is more comprehensive for manufacturers who sell all of theiroutput through intermediaries Evaluation of channel members is more comprehensive for manufacturers who sell all of theiroutput through intermediaries Because the firm’s success in the market is directlydependent on the channel members’ performanceBecause the firm’s success in the market is directlydependent on the channel members’ performanceWhy?14143. Nature of the Product3. Nature of the ProductThe more complex the product, the broader the scope of evaluationThe more complex the product, the broader the scope of evaluationFor products of very high unit value, thegain or loss of a single order is critical to the manufacturerFor products of very high unit value, thegain or loss of a single order is critical to the manufacturer+14144. Number of Channel Members4. Number of Channel MembersManufacturers who useintensive distributionManufacturers who useintensive distributionChannel memberevaluation may be cursory Channel memberevaluation may be cursory Manufacturers who usehighly selectivedistributionManufacturers who usehighly selectivedistributionChannel memberevaluation iscomprehensiveChannel memberevaluation iscomprehensivePerformance Evaluation versus MonitoringPerformance Evaluation versus Monitoring1414Performance EvaluationDay-to-DayMonitoringOverall performancereviews that givemanagement a complete& objective analysis ofdistributor operationsAppraisals that assist management in maintaining currentoperating control ofdistributors’ efforts1414Channel Performance Audit*Channel Performance Audit*Three Phases of Channel Performance Audit1. Developing evaluation criteria Channel goals2. Periodically evaluating the performance against the criteria3. Recommending corrective actions1414I. Key Criteria for I. Key Criteria for Channel Performance Audit*Channel Performance Audit*•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*14141. Sales Performance1. Sales PerformanceCriteria channel managershould use to evaluate sales data:1.Comparisons of thechannel member’s currentsales to historical sales2. Cross comparisons ofa member’s sales withthose of other members3. Comparisons of thechannel member’s saleswith predetermined quotas14142. Inventory Maintenance2. Inventory Maintenance1. Total level of channel member’s inventory2. Shelf or floor space devoted to inventory3. Shelf or floor space relative to competitors’ inventory4. Breakdown by particular products in units & dollars5. Comparison of figures with channel members’ estimatedpurchases of related & competitive lines6. Condition of inventory & inventory facilities7. Amount of old stock & efforts made to move it8. Adequacy of channel member’s inventory control &record-keeping systemKey Criteria for evaluating member inventory performance:14143. Selling Capabilities3. Selling CapabilitiesManufacturer who obtains sales recordsfor channel members’ salespeople should examine the following factors:1.Number of salespeoplethe channel memberassigns to manufacturer’sproduct line 2.Technical knowledge and competenceof channel member’s salespeople 3.Salesperson interestin manufacturer’s productsEx) CISCOAttitudes44Negative ones often addressed after they have contributed to poor performance4. Attitudes of Channel Members4. Attitudes of Channel MembersShould be evaluated independently of sales dataNot