Chapter 9Chapter 9

Motivating the Channel Members

Motivation Management:

99Motivation ManagementMotivation Management

The actions taken by the manufacturers tofoster channel member cooperation inimplementing the manufacturer’s distribution objectives Compliance + Active Representation

99

This is a Serious Problem!1. Manufacturers spend more than $70B

for trade promotion2. 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.

99Motivating Channel Motivating Channel MembersMembers

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.

99I. Finding Out Channel Member I. Finding Out Channel Member Needs & ProblemsNeeds & Problems

1. Research studies of channel members2. Research studies by outside parties3. Marketing channel audits4. Distributor advisory councils + Feedback from Your Salesforce

Approaches for learning about member needs & problems*:

991. Research Studies 1. Research Studies of Channel of Channel MembersMembers

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.

992. Research Studies 2. Research Studies by Outside by Outside PartiesParties

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.

(Such as a third-party research

firm)

3. Marketing Channel Audits3. Marketing Channel Audits 99

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.

99Marketing Channel AuditsMarketing 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.

994. Distributor Advisory Councils4. 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

II. Offering Support to the II. Offering Support to the Channel MembersChannel Members

99

3 Types of

ChannelPrograms

2. Partnership or strategic alliance

3. Distribution programming

1. Cooperative Arrangements

Relationship DifferencesRelationship Differences99

Cooperative Arrangements

Intermittent(irregular) interactions between manufacturer& channel members

Partnerships & Strategic Alliances

Continuing & mutually supportive relationship

Distribution Programming

Deals with virtually all aspects of the channel relationship

991. Cooperative Arrangements1. Cooperative Arrangements

- Focuses on channel member needs & problems

- Simple & straightforward

- Conveys a clear sense of mutual benefit

99Cooperative ArrangementsCooperative 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(See more in table 9.2)

992. Partnerships & Strategic 2. Partnerships & Strategic AlliancesAlliances

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

Partnerships & Strategic Partnerships & Strategic AlliancesAlliances

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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

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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

3. Distribution Programming3. Distribution Programming 99

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- Offer all channel members advantages of vertically integrated channel and allow them maintaining their status as independent business firms Ex) Dealership and Franchising

Distribution ProgrammingDistribution Programming 99

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 (see more in Table 9.4):• Price concessions to channel members• Financial assistance• Some kind of protection for channel members

3. An Example: Category Management

99III. Providing Leadership to Motivate Channel Members

• Regardless of which approach the channel manager uses to motivate channel members, leadership must still be exercised on a continuing basis if motivation programs are to operate effectively and viably.

99Providing Leadership to Motivate Channel Members

• In attempting to exercise such leadership, however, the channel manager must remember to deal with several significant challenges characteristic of the interorganizational setting of marketing channel. Among these are:

1. The looseness of the organization of many channel systems

2. A proclivity (tendency) by channel members to avoid central direction

3. Lack of single ownership4. No clear demarcation (separation) of a superior

subordinate relationship