Chapter 9

Motivating the Channel Members

9Major Topics for Ch. 9:Motivating Channel

Members

1. General Discussion2. Finding out Channel Member

Needs 3. Three Types of Programs To

Motivate Channel Members*4. Another Approach on Managing

Channel Members* (Econ-based Approach)

Motivation Management:

9Motivation Management

The actions taken by the manufacturers tofoster channel member cooperation inimplementing the manufacturer’s distribution objectives Beyond Compliance Active Representation of Your Products!

9

This is a Serious Problem!*

1. Manufacturers spend more than $70B for trade promotion

2. 85% of the manufacturers believe that the money given to retailers is ineffectively spent

3. Retailers say that 40% of all manufacturer-supplied POP displays are never used.

9

Motivating Channel Members

Basic Framework

1.Find out the needs and problems of channel members.

2.Offer support to the channel members that matches with their needs and problems.

3.Provide leadership through the effective use of power.

9II. Finding Out Channel Member Needs & Problems

1. Research studies of channel members

2. Research studies by outside parties3. Marketing channel audits4. Distributor advisory councils + Feedback from Your Salesforce

Approaches for learning about member needs & problems*:

91. Research Studies of Channel Members

Less than 1 percent of manufacturers’ researchbudgets is spent on channel member research!

BUT:

Manufacturer-initiated research can be useful because certain types of needs or problems may not be at all obvious.

* My experience

92. Research Studies by Outside Parties

Why use outside parties to conduct research?

They provide a higher assurance of objectivity.

They provide a level of expertise that the manufacturer may notpossess.

3. Marketing Channel Audits* 9

Focus of channel manager’s approach:

• Gather data on how channel membersperceive the manufacturer’s marketingprogram and its component parts.

• Locate the strengths and weaknessesin the relationships.

• Learn what is expected of manufacturers

to make the channel relationship viable and optimal.

* Issue of Using a “Right” Metric

9Marketing Channel Audits

What makes marketing channel audits most effective?

It should identify and definein detail the issues

relevant to the manufacturer-

reseller relationship.

Issues chosen forthe audit should

be cross-referenced to any relevant

variables.

It mustbe conductedperiodically soas to capture

trends &patterns.

94. Distributor Advisory Councils

Who is involved?

Top management representatives from the manufacturer and from the channel members

What are the benefits?

• Provides recognition for the channel members• Provides a vehicle for identifying and discussing

mutual needs and problems• Results in an overall improvement of channel

communications

III. Means to Motivate Channel Members*9

3 Types of

ChannelPrograms

2. Partnership or Strategic Alliance

3. Distribution Programming

1. Cooperative Arrangements

Relationship Differences9

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

91. Cooperative Arrangements

- Focuses on channel member needs & problems

- Simple & straightforward

- Conveys a clear sense of mutual benefit

Ex) Coop program between P&G and Kroger

9Cooperative Arrangements

Typical types of cooperative programsprovided by manufacturers to channel

members• Cooperative advertising allowances• Payments for interior displays• Contests for buyers, salespeople, etc.• Allowances for warehousing functions• Payments for window display space• Detail men who check inventory• Demonstrators• Coupon-handling allowance• Free goods A Common Element of all the above

elements?

92. Partnerships & Strategic Alliances*

Focus on a continuing and mutuallysupportive relationship between themanufacturer and its channel members

* Mainly For An Elite Group of Distributors

Partnerships & Strategic Alliances

9

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

18

Strategic Distribution Alliance • Characteristics

– Enduring connections– Substantial connections

• What sets SDA apart from others– Trust– Commitment Norm-based Motivation (Solidarity, Mutuality, Continuity)

• Building Commitment– Expectation of continuity– Bilateral communication– Balanced Power between the two

• Commitment is mutual

19

Strategic Distribution Alliance* •

How to gauge the commitment by the other side?

– Previous relationship– Actions (ex: specialized investment)

• A word of caution: Not for every relationship!– One side has special needs– The other side has the capability to meet those needs– Each side faces exit barriers

3. Distribution Programming* 9

A comprehensive set of policies for the promotionof a product through the channel

Developed as a joint effort between the manufacturer and the channel members

to incorporate the needs of both

* Ex) (Exclusive) Dealership or Franchise System

Distribution Programming 9

Steps for developing a program:

1. Analysis of marketing objectives & the kinds of levels of support needed from channel members• Ascertains channel members’ needs &

problem areas

2. Formulate specific channel policies that offer:• Price concessions to channel members• Financial advice• Some kind of protection for channel members

3. An Example: Category Management

9IV. Another Approach on Motivating

Channel Members*

1. Before you begin…1. Screening and Qualification2. Selection and Training

2. As you begin…1. Role Specification2. Joint Planning

* My Research

9Another Approach on Motivating Channel (Cont’d)

3. After You Began…1. Channel Incentive: Need More than $$$!2. Monitoring: Outcome Monitoring

Behavior Monitoring 3. Enforcement:

Legal Enforcement Market Enforcement Self Enforcement