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ch07.docx
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ch07
Chapter7
SELECTINGTHECHANNELMEMBERS
TeachingNotes
Thefocusofthischapteristheprocessofselectingthecorrectchannelmembers(describedas“strong”)whocanperformthedistributiontasksmostefficiently.Emphasisshouldbeplacedonthedelineationofthedistributiontasks,priorchannelmemberselection,andonthehumanelementofmanagingtheindividualchannelmembers.
ThischaptercontinuestheprocessstartedinChapter6andexploresthelastphaseofchanneldesign–selection.
ChapterObjectives
Theselectionofchannelmembersisthelast(seventh)phaseofchanneldesign.Theselectionprocessconsistsofthreebasicsteps:
(1)findingprospectivechannelmembers,
(2)applyingselectioncriteriatodeterminewhetherthesemembersaresuitable,and(3)securingprospectivemembersforthechannel.
Eachfirmmustdevelopitsownlistofcriteriaforchannelmembersforitsparticularobjectivesandallowforflexibilityforchangesinpoliciesandobjectives.Animportantpointtonoteisthatchannelmembersdonotalways“standinline”tobeselectedbyproducersandmanufacturers.
Learningobjectives
1)Haveanappreciationfortheimportanceofchannelmemberselection.
2)Understandtherelationshipbetweenchannelmemberselectionanddistributionintensity.
3)Knowthemainsourcesforfindingprospectivechannelmembers.
4)Befamiliarwithgeneralizedlistsofselectioncriteria.
5)Recognizetheneedforadaptingselectioncriteriatotheneedsofparticularfirms.
6)Realizethatchannelmemberselectioncanbeatwo-waystreet.
7)Appreciatetheneedtoofferinducementstoprospectivechannelmemberstosecurethemasactualchannelmembers.
8)Recognizethehumansideofchannelmemberselectionandtheroleoffairandfriendlyrelationshipsinchannels.
ChapterTopics
1)ChannelMemberSelectionandChannelDesign
2)TheSelectionProcess
3)FindingProspectiveChannelMembers
4)ApplyingSelectionCriteria
5)SecuringtheChannelMembers
ChapterOutline
ChannelMemberSelectionandChannelDesign
Channelselectiondecisionsarefrequentlynecessaryevenwhenchannelstructurechangeshavenotbeenmade.Firmsmayneedadditionaloutletstoallowforgrowthortoreplacechannelmembersthathaveleftthechannel.
Channeldesignispresentedasadecisionfacedbythemarketer.
Asageneralrule,thegreatertheintensityofdistribution,thelessemphasisonselection.
Ifafirm’semphasisistoensureintensivedistribution,thoseintermediariesselectedareoftenselectedonlyontheirbasisoftheprobabilityofpayingtheirbills.Ontheotherhand,ifchannelstructurestressesmoreselectivedistribution,theprospectivemembersshouldbemuchmorecarefullyscrutinizedandselectiondecisionsbecomemorecritical.
TheSelectionProcess
Threestepsareinvolved:
1.Findingprospectivechannelmembers
2.Applyingselectioncriteriatodeterminethesuitabilityofprospectivechannelmembers
3.Securingtheprospectivechannelmembersasactualchannelmembers
FindingProspectiveChannelMembers
Themostimportantsourcesforfindingchannelmembersarelistedbelowintheirorderofimportance.
1)Fieldsalesorganizations
2)Tradesources
3)Resellerinquiries
4)Customers
5)Advertising
6)Tradeshows
7)Othersources
1)FieldSalesOrganizations
Companysalespeopleareinthebestpositiontoknowpotentialchannelmembers,usuallybetterthananyoneelseinthefirm.Companiesmaynotadequatelyrewardsalespeoplefortheireffortsinfindingpotentialchannelmembers.
2)TradeSources
Tradesourcessuchastradeassociations,tradepublications,directories,tradeshows,andthe“grapevine”areallvaluablesourcesofinformationaboutprospectivemembers.
Tables7.1and7.2providelistingsofanumberofwholesaleandretailtradeassociations.
3)ResellerInquiries
Manyfirmslearnaboutpotentialchannelmembersthroughdirectinquiriesfromintermediarieshandlingtheirproducts.
4)Customers
Customersofprospectiveintermediariescanbeasourceofinformation.Usinginformalorformalsurveysoftheviewsofcustomers,afirmmaywellbeabletogaininsightsaboutthestrengthsandweaknessesofaprospectivechannelmemberfromthecustomer’s(enduser)pointofview.
5)Advertising
Advertisementsintradepublicationsofferanotherapproachtofindingchannelmembers.
Figure7.1showsanadinIndustrialDistributionforalineofindustrialhoses.
Figure7.2showsanadforMAGLITE®flashlights.
6)TradeShows
Tradeshowsorconventionscanbeaveryfruitfulsourceforfindingpotentialchannelmembers.Manytradeassociations,attheindustrialandretaillevels,holdannualconventionsatwhichnumerousrepresentativesfromthevariousorganizationsarerepresented.
7)OtherSources
Somefirmsalsofindthefollowingsourceshelpfulinlocatingprospectivemembers.
a.Chamberofcommerce,banks,andlocalrealestatedealers
b.Classifiedtelephonedirectoriesoryellowpages
c.Direct-mailsolicitations
d.Contactsfrompreviousapplications
e.Independentconsultants
f.Listbrokersthatselllistsofnamesofbusinesses
g.Businessdatabases
h.TheInternet
ApplyingSelectionCriteria
Havingdevelopedalistofprospectivechannelmembers,thenextstepistoappraisetheseprospectsinlightofselectioncriteria.Ifafirmhasnotyetdevelopedasetofcriteriaforselectingchannelmembers,itmustdevelopone.However,nolistofcriteria,nomatterhowcarefullydeveloped,isadequateforafirmunderallconditions.
1)GeneralizedListsofCriteria
Brendeldevelopedalistof20keyquestionsforindustrialfirmstoasktheirprospectivechannelmembers.
Thislistofquestionsisposedonpage231ofthetext.YoumaywanttoopenuptheclassfordiscussionatthispointandseeifclassmemberscanaddanyadditionalquestionstothislistoraskifthislistisstillapplicabletotodaywiththeadventoftheInternet.
HlavacekandMcCuistion,arguethatfortechnicalproductssoldintheindustrialmarket,manufacturersshouldselectdistributorswhocarryasmallratherthanlargearrayofproducts.Theyarguethatwithasmaller,ratherthanalarger,arrayofproductscarriedmoreattentionwillbepaidtoaparticularmanufacturer’sproduct.Theyalsoarguethatthepotentialchannelmember’smarketcoverageshouldbespecifiedascriteriaforselection.Further,theybelievethatthefinancialcapacityofthepotentialchannelmembershouldnotbeoveremphasizedbecausesometimeslessfinancedfirmsare“hungrier”andmoreaggressive.
Shipleyreportsthatthereshouldbe12criteriagroupedunderthreebasiccategories:
(1)salesandmarketfactors,
(2)productandservicefactors,and(3)riskanduncertaintyfactors.
Table7.3showsthesecriteriabyShipley.
YeohandCalantoneidentifysixmajorcategoriesofselectioncriteria:
(1)commitmentlevel,
(2)financialstrength,(3)marketingskills,(4)product-relatedfactors,(5)planningabilities,and(6)facilitatingfactors.Thesearereferredtoas“corecompetencies”thatdistributorsmustpossessforeffectiverepresentationinforeignmarkets.
ThemostcomprehensiveanddefinitivelistofchannelmemberselectioncriteriaisstillthatofferedoverthreedecadesagobyPegram.Tenofthesearediscussedbriefly:
A)CreditandFinancialCondition
Theinvestigationofthecreditandfinancialpositionofprospectiveintermediariesisvital.
B)SaleStrength
Notonlythequalityofthesalespeoplebutalsotheactualnumberofsalespeopleemployed.
C)ProductLines
Manufacturersweregenerallyfoundtoconsiderfouraspectsoftheintermediary’sproductline:
(1)competitiveproducts,
(2)compatibleproducts,(3)complementaryproducts,and(4)qualityofthelinescarried.
1.Manufacturersgenerallytrytoavoidintermediarieswhocarrydirectlycompetitiveproductlines.Manytimesbothwholesaleandretailintermediariescarrydirectlycompetitiveproducts.
2.Manufacturerspreferintermediarieswhohandlecompatibleproducts.
3.Manufacturerslookfavorablyonintermediarieswhocarrycomplementaryproductsbecausetheyofferabetteroverallproductmixtotheircustomers.
4.Manufacturersseekintermediariesthatcarryproductlinesthatareequaltoorbetterthantheirownlines.Theydonotwanttobeassociatedwith“dog”linesiftheycanavoidit.
D)Reputation
Mostmanufacturerswillflatlyeliminateprospectiveintermediarieswhodonotenjoyagoodreputationintheircommunity.Forretailintermediaries,storeimageisanespeciallycriticalcomponentoftheretailer’soverallreputation.
E)MarketCoverage
Theadequacyoftheintermediaryincoveringthegeographicalterritorythatthemanufacturerwouldliketoreachisknownasmarketcoverage.Manufacturerswillattempttogetthebestterritorycoveragewithaminimumofoverlapping.
F)SalesPerformance
Themainconsiderationhereiswhethertheprospectiveintermediarycancaptureasmuchmarketshareasthemanufacturerexpects.
G)ManagementSuccession
Manyintermediariesaremanagedbythefirm’sowner/founderandmanyaresmallbusinesses.Therefore,thecontinuityofmanagementisacriticalfactor.
H)ManagementAbility
Manymanufacturersfeelthataprospectivechannelmemberisnotevenworthconsideringifthequalityofmanagementispoor.Oneofthekeydeterminantsofmanagement’sabilityistheirabilitytoorganize,train,andretainsalespeople.
I)Attitude
Thiscriterionappliesmainlytoaprospectiveintermediary’saggressiveness,enthusiasm,andinitiative.Thesequalitiesarebelievedtobecloselyrelatedtolong-termsuccessinhandlingthemanufacturer’sproduct.
J)Size
Sometimesaprospectiveintermediaryisjudged
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