Amity Business School

Amity Business School MBA (M&S) ,Class of 2013, Semester II

Evaluation of Channel Partners

Swati Bhatnagar

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Channel member performance

Channel member performance evaluation is as important as evaluation of employees working with the firm Difference lies in dealing with independent business firms than employees. Setting of the evaluation process is interorganizational rather than intraorganizational

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Factors affecting scope & frequency of evaluations

Degree of manufacturers control over channel members Relative importance of channel members Nature of the product Number of channel members

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Degree of control depends on : Contractual agreements Acceptance of manufacturers product Market position of the manufacturer Importance of channel members depends whether the manufacturer sells all its outputs through intermediaries or relies less on intermediaries

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Nature of product Whether reseller sells a high volume product of low unit value or products of high unit value which is more complex Number of channel members Generally for intensive its a routine sales data whereas for selective its a more comprehensive performance evaluation

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Channel member performance audit

Is different from routine day to day monitoring of performance based exclusively on standard sales performance. Is periodic & comprehensive review of their performance Consists of three phases 1. Developing criteria for measuring their performance 2. Periodically evaluating their performance against the criteria 3. Recommending corrective actions

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Developing criteria for performance

Many possible criteria for measuring channel member performance can be used but the most common used by the manufacturers are:Sales performance Inventory maintained by channel members Selling capabilities of channel members Attitudes of channel members Competition faced by channel members General growth prospects of their channel members

Sales performance

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Care should be taken to distinguish b/w sales of the manufacturer to the channel member & channel members sales of manufacturers products to customers Attempt should always be taken to get the sales data from the channel members themselves. The same depends on their degree of control exerted over the channel members However in a traditionally loosely aligned channel, the manufacturers ability to get the sales data is quite limited. The sales data should be evaluated in terms of the following: Comparison of channel members current sales to historic sales Cross comparison of a members sales with those of other channel members Comparison of channel members sales with pre determined quota( if given)

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Inventory maintenance
Generally difficult for less dominant manufacturer to make the channel member adhere to this requirement strictly as they lack the power to influence. Check of inventory levels can often be done by the field sales force

Selling capabilities
Particularly important at the wholesale level. The manufacturer should pay particular attention to:No. of salespeople channel members deploy to various product lines Technical knowledge & competence of his sales people Salesperson interest in the manufacturers products

Attitudes of channel membersAmity Business School

The attitude is generally not evaluated unless the sales performance is unsatisfactory However in order to identify a negative channel partner attitude should be evaluated independent of the sales data Can use informal feedback and news from grapevine to assess& track his attitude

Competition
Evaluate him in terms of :Competition from other intermediaries & competition from other product lines The comparative data is very useful when the manufacturer decides to expand his coverage or plans to replace existing channel members

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General growth prospects

Channel members organization expanding, showing signs of improvement , channel members personnel qualified, age , health, succession management , overall capacity to meet market expansion

Other criteria
Financial status, character, reputation, quality of service

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Applying Performance criteria

Three approaches may be used : Separate performance evaluation on one or more criteria Multiple criteria combined formally to evaluate overall performance qualitatively. Multiple criteria combined formally to arrive at a quantitative index of overall performance

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Multiple criteria combined informally

Various operational performance measures on relevant criteria obtained

Managerial judgment used to combine performance measures

Qualitative judgment made about overall channel member performance

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Multiple criteria combined formally

Criteria Sales Performance Inventory maintenance Selling capabilities Attitude Growth Prospects Criteria weights(A) 0.5 0.2 0.15 0.1 0.05 Criteria Scores(B) (0-10) 7 5 6 4 3 Weighted score(A*B) 3.5 1.0 0.9 0.4 0.15

Overall performance rating : 5.95

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Recommending corrective actions

Meant to improve channel member performance who are not meeting minimum performance standards Carefully analyze channel members needs & problems Develop concrete & practical approaches aimed at actively seeking information on channel members needs and problems Approaches such as building a formal channel communication network, conducting marketing channel audits, forming distributor advisory councils, utilize research conducted by outside parties