The success of any marketing channel lies in the foundation of right channel design decision. But channel design is just the planning part; it needs right implementation to be successful. The implementation can be taken care of, with the help of channel management decisions, it includes right from, selecting a channel member to training them to motivating them and to evaluating them on their performance. In case, the performance is not as expected, the modifications are done by the company in the channel arrangements.
Step # 1. Selecting Channel Members:
The first priority for any company is choosing the right channel members. As the business is dependent upon the marketing channel partners, it becomes crucial for the success of any company to select the best channel partner. All the companies whether it’s a product manufacturing company like Colgate or Onida or a service company like IMS or Career Launcher, needs a good channel partner to succeed.
Generally all the companies advertise through newspapers and trade magazines to look out for channel partners. If the company is known and successful, it becomes quite easy for the company to find them. But in the case of a new company launching a new product, then finding a channel partner can be tough. In both the cases, the parameters for choosing a channel partner should be very clear for the company as well as the channel partner.
In some businesses, like opening a McDonald’s franchisee, the location becomes more important than in any other business. As the business is dependent on the footfalls it can get. The company can evaluate any channel partner on the basis of business experience, financial capabilities, locational advantages, growth and profit record, experience of the promoters. In the case of exclusive distribution, these parameters become more important for the company.
Step # 2. Training Channel Partners:
Once the channel partner is selected, they need to be trained as they are the face of the company. All the companies have intensive training programmes for its dealers to tell them about their sales and service capabilities, product knowledge, expected service quality and operational procedures to follow. For example, LG Electronics India regularly trains its sub-dealers, direct dealers and service franchisees.
The training tries to facilitate performance, improve knowledge, skills and attitude of its dealers and sales staff. The training is given both through online and offline methods, which covers functional, technical and behavioural aspects. Similarly Kirloskar Brothers Limited (KBL) makes the customers and dealers aware of the fundaments and working principles of Centrifugal Pumps, enabling them to operate and maintain the equipment more efficiently. The training program is designed by KBL to offer best possible theoretical as well as practical knowledge to their valued customers and dealers.
Step # 3. Motivating Channel Members:
As the channel members are as important as your customers, a company needs to make them happy. Just like anybody, channel members are also needs to be motivated. On the one hand, the company tries to train them for their better performance and on the other hand, the company provides them incentives, higher margins, premiums, display allowances, advertising allowances and special deals.
While managing the relationship with the channel members, a company can use coercive power or it can use reward power or legitimate power. A company can also use expert power or referent power. In the case of coercive and legitimate power, the relationship can turn sour and it may not be productive in the long run. But the widely used reward power works the best to get the cooperation from the channel members. In the case of expert power, the channel member looks forward to the company for its expertise and becomes dependent, if the expertise is ever changing.
When a company is highly respected like Sony, LG, Apple, Maruti Suzuki, then they have referent power. The channel members feel proud to be associated with it. In turn, it makes the channel partners cooperate with the company. This is the highest authority a company can possess.
The most advanced supply distributor agreement is distribution programming, which can be defined as building a planned, professionally managed vertical marketing system that meets the needs of both manufacturers and distributors. The manufacturer establishes a department within the company called distributor relations planning. Its job is to identify distributor needs and build up merchandising programmes to help each distributor operate as efficiently as possible.
Step # 4. Evaluating Channel Members:
Channel members are evaluated on the basis of their sales, inventory level, service support, delivery time performance, complaint redressal, promotional program implementation and training performance.
If the performance of the channel member is satisfactory, then it is rewarded for its efforts and if the performance falls below mark, it is advised to make necessary changes in the processes. In case of channel members, where the problems are beyond rectification, they are removed and the company appoints a new channel member.
Step # 5. Modifying Channel Arrangements:
With the changing times, the company needs to modify its channel arrangements. The product line can expand, the consumers buying pattern can change, the new competition can come up, a new distribution channel can emerge or the demand of the product can change by getting into the later stages of product life cycle. All these factors can lead the company to change its channel arrangement.
When Intex started their operations in 1996, they had just one product – Ethernet card. Now the product has expanded to 26 product groups with more than 300 stock keeping units. Now their marketing channel consist of 2 mother warehouses, 2 regional offices, 28 branches, 57 service centres, 183 service franchises and more than 2000 channel partners. Similarly with the growing usage of Internet, all the retailers are trying to follow a brick and click model, where they sell their merchandise in their stores and they sell it online also. Kishore Biyani’s Future group is a good example of the same.
They target their customers through a brick model with Big Bazaar, Pantaloons, E-Zone, Home Town etc. and follow the customers online through their click model i.e. www(dot)futurebazaar(dot)com and www(dot)ezoneonline(dot)com . From time to time, a company needs to track the changes in the market and on this basis; they need to modify their channel members.