CHAPTER 9
Motivating the
Channel Members
MEMBERS:
Apat, Kyla Mae
Castor, Kristha Mae
Calamba, Kyla Zane
Gilbuena, Kissther Anne
Matugas, Justine
Understand the definitions of channel management
01 and motivation management in marketing channels. LEARNING
02
Recognize the distinction between channel management OBJECTIVES
decisions and channel design decisions. After reading this chapter, you should:
03 Be familiar with the basic framework for motivating channel
members.
04 Know the major means for learning about channel member
needs and problems.
05 Understand the basic approaches for providing support for
channel members.
06 Be aware of the underlying differences in the relationship implied in the three approaches for
supporting channel members
Be cognizant of the need to provide leadership in channels through the effective use of power.
07
08 Realize that there are significant limitations on the degree of channel control available to the
channel manager in an interorganizational setting.
In this chapter we examine one of the most fundamental and
important aspects of channel management—motivating
channel members. In the context of channel management,
motivation refers to the actions taken by the manufacturer,
producer or franchisor to foster channel member
cooperation in implementing the distribution objectives.
Our discussion is structured around the three basic facets
involved in motivation management in the channel:
1. Finding out the needs and problems of channel members
2. Offering support to the channel members that is
consistent with their needs and problems
3. Providing leadership through the effective use of power
Finding out the needs and problems of channel
members
Approaches for Learning About Member Needs and Problems
(1) Research studies of channel members conducted
by manufacturers
-research studies of channel member needs and problems are rarer. Indeed, most
manufacturers even large and sophisticated ones never conduct such research at all. Estimates
indicate that less than 1 percent of manufacturers’ research budgets is spent on channel member
research.
(2) Research studies by outside parties
-Research designed and executed by a third party who is not a member of the channel is
sometimes necessary if complete and unbiased data on channel member needs and problems are
to be obtained.
Finding out the needs and problems of
channel members
Approaches for Learning About Member Needs and Problems
(3) Marketing channel audits
-As with the periodic financial audit, which virtually all firms have performed, the channel
manager can conduct a marketing channel audit periodically.
(4) Distributor advisory councils.
-Another effective approach for learning about channel member needs and problems is to
set up a distributor advisory council (sometimes referred to as a dealer advisory counsel or
channel member committee).
Offering Support to Channel Members
Support for channel members refers to the producer or
manufacturer’s efforts in helping channel members to meet
their needs and solve their problems. Such support should help
to create a more highly motivated group of channel members.
Such programs for providing channel member support can generally be grouped into
one of the following three categories:
(1) cooperative,
(2) partnership or strategic alliance, and
(3) distribution programming.
MEANS TO MOTIVATE CHANNEL MEMBERS
• Cooperative Arrangements
Intermittent interactions between manufacturer & channel members
• Partnerships & Strategic Alliances
Continuing & mutually supportive relationship
• Distribution Programming
Deals with virtually all aspects of the channel relationship
COOPERATIVE ARRANGEMENTS
• Focuses on channel
needs & problems
• Simple &
straightforward
• Conveys a clear sense of
mutual benefit
Typically types of cooperative programs provided by
Manufacturers to channel members
• Cooperative advertising allowances
• Payments for interior displays, including shelf-extender, dump displays, “A”
locations, aisle displays, etc.
• Contests for buyers, salespeople, etc.
• Allowances for a variety of warehousing functions
• Payments for window display space, plus installation costs
• Detail men who check inventory, put up stock, set up complete promotion, etc.
• Demonstrators
• Coupon-handling allowance
• Free goods
PARTNERSHIPS & STRATEGIC ALLIANCES
Focus on a continuing and mutually supportive relationship between the
manufacturer and its channel members.
Three basic phases:
1. Manufacturer should make explicit statement of policies in areas such as
product availability, technical support, pricing etc.
2. Manufacturer should assess all existing distributors as to their capabilities for
fulfilling their roles
3. Manufacturer should continually appraise the appropriateness of the policies
guiding his or her relationship with the channel members
Relationships w/
Dealers
- focus on continuing and
mutually beneficial relationship
between the channel members in
an effort to provide a more highly
motivated team, network or
alliance of channel members.
A Frame of Reference
Distribution • Manufacturer's Marketing Goals
Programming • Manufacturer's Channel Requirements
• Retailer's Requirements
- refers to a comprehensive set of policies • Distribution Policies
for the promotion of a product through the
channel. 3 Major Groups
1. Those offering price concessions to channel
- is developed as a joint effort between the
members.
manufacturer and the other channel
members in order to incorporate the needs 2. Those offering financial assistance
of all parties involved. 3. Those offering some kind of protection for
channel distribution
Manufacturer's Marketing Goals
- Corporate capability
–Competition
–Demand
–Cost-volume relationships
–Legal considerations
–Reseller capability in terms of :
• Sales
• Market share
• Contribution to overhead
• Rate of return on investment
• Customer attitude, preferences and ‘readiness to buy’ indices
Manufacturer's Channel Requirements
– Coverage ratio
– Amount and location of display space
–Level and composition of inventory investment
–Service capability and standards
– Advertising, sales promotion and personal selling support
–Market development activities
Retailer's Requirements
–Managerial aspirations
–Trade preferences
–Financial goals :
• Rate of inventory turnover
• Rate of return on investment
• Gross margin
• Contribution to overhead
• Gross margin and contribution to overhead per rupee invested
• Gross margin and contribution to overhead per unit of space
DISTRIBUTIONS POLICIES
– Price concessions
– Financial assistance
– Protective provisions
Providing Leadership to
Motivate Channel Members
– Control must be exercised
through effective leadership on a
continuing basis to attain a well
motivated team of channel
members.