MOTIVATING THE CHANNEL MEMBERS

BY: Shwetanshu GuptaMBA-49-2013

MARKETING CHANNEL: Marketing channel/ trade channel/ distribution channel

are sets of independent organizations involved in the process of making a product/service available for use or consumption.

They are a set of pathways a product/service follows after production culminating in purchase and use by the final end user.

CHANNEL MEMBERS

Channel members are the people or intermediaries through which goods and services go through before they reach the consumer.

Intermediaries can be – wholesalers, retailers, brokers, sales agent etc.

Manufacturer Wholesaler Retailer

Product

Consumer

IMPORTANCE OF CHANNEL MEMBERS

Intermediaries can provide economies by reducing the amount of work that must be done by both producers and consumers.

Intermediaries transforms the assortments of products made by producers into assortments wanted by consumers.

In making products and services available to consumers , channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who use them.

Intermediaries help producers complete transaction by:

Information: gathering and distributing marketing research and intelligence information needed for planning and aiding exchange.

Promotion: developing and spreading persuasive communications about an offer.

Contact: finding and communicating with prospective buyer.

Matching: shaping and fitting the offer to the buyer’s needs including activities such as manufacturing, assembling, grading and packaging.

Negotiation: reaching an agreement on price.

Intermediaries help producers fulfill transaction by:

Physical distribution: transporting and storing goods.

Financing: acquiring and using funds to cover the costs of the channel work.

Risk taking: assuming the risk of carrying out the channel work.

MOTIVATING THE CHANNEL MEMBERS

Company’s now a days view its intermediaries in the same way it views its end users.

To be able to stimulate channel members to top performance, it is necessary to understand their needs and wants and for this purpose it is necessary to motivate the channel members.

Motivating the channel members means: taking such actions that foster channel member cooperation in implementing the manufacturer’s distribution objectives beyond compliance active representation of products.

It includes: finding out needs and problems of channel members.

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

Providing leadership through the effective use of power.

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 member needs &

problems- Simple & straightforward- Conveys a clear sense of mutual benefit- It includes: 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

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

DISTRIBUTION PROGRAMMING*A comprehensive set of policies for the promotion of

a product through the channel.

Developed as a joint effort between the manufacturer and the channel members to incorporate the needs of both.

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

CHANNEL POWER:

It is defined as the ability to alter channel member’s behavior so that they take actions they would not have taken otherwise.

Following type of power can be drawn by manufacturer to elicit cooperation:

Coercive power

Reward power

Legitimate power

Expert power

Referant power

COERCIVE POWER

A manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate.

This power can be effective but its exercise produces resentment and can generate conflict and can lead the intermediaries to organize countervailing power.

REWARD POWER

The manufacturer offers intermediaries an extra benefit for performing specific acts or functions.

It typically produces better results than coercive power , but can be overrated.

Intermediaries may come to expect a reward every time the manufacturer wants a certain behavior to occur.

LEGITIMATE POWER

The manufacturer requires a behavior that is warranted under the contract.

As long as intermediaries view the manufacturer as a legitimate leader, legitimate power works

EXPERT POWER

The manufacturer has special knowledge that the intermediaries value.

However when expertise pass on to intermediaries this power weakens.

REFERENT POWER

The manufacturer is so highly respected that intermediaries are proud to be associated with it.

Companies such as IBM, Caterpillar and HP(Hewlett-Packard) have high referent power

IMPORTANCE OF MOTIVATING CHANNEL MEMBERS

Motivational tools helps to ensure that channel members give preference to company’s product over competitor’s product

Motivation plays an important role in winning channel member’s mind share.

By winning mind share, channel member recommend or actively promote company’s product over competitor’s product

BUILD PREFERENCE FOR BRANDS

Motivating intermediaries is an important strategy for influencing channel members behavior.

Offering training programs or marketing support to members add value to the relationship between supplier and channel by helping them to improve their performance and grow their own business.

A strong relationship makes it easier to launch new products or marketing campaigns through the channel, helping to build revenue and profits.

ADD VALUE TO PRODUCT OFFER

Financial incentives are an important source of motivation to channel members.

By offering discounts , on purchases above an agreed level channel members can be encouraged to stock or sell more products.

Financial incentives helps in launching new products, increase sales of existing products and widen distribution base.

INCREASE SALES THROUGH THE CHANNEL

Motivation helps channel member to improve their performance.

Offering them different bonus or discount levels, marketing and training support, performance level can be enhanced.

IMPROVE PERFORMANCE