Selection and Appointment of channel members

Channel Member Selection

Selection may or may not be the result of channel design.

The last phase of channel design

Firm may need additional outlets to allow for growth

To replace channel members that have left

Selection & Distribution Intensity

The greater the intensity of distribution

The less the emphasis on selection

The Selection Process

1. Finding prospective channel members

3. Securing theprospective

channel membersas actual

channel members

2. Applying selection criteriato determine the

suitability of prospective

channel members

Finding Members

1. Field salesorganization

7. Other sources

5. Advertising

6. Trade shows

2. Trade sources

3. Reseller inquiries

4. Customers

Field Sales Organization

• They are often able to pick up information about likely intermediaries.

• They may have lined up prospective intermediaries.

• The manufacturer must adequately reward salespeople for their time & effort establishing connections.

Salespeople are the best positioned to

know about potentialintermediaries

BUT:

Trade Sources

• Trade associations• Trade publications• Directories• Trade shows• Firms selling similar

products• The “grapevine”

For Example:• Industrial Distribution

magazine• The Verified Directory of

Manufacturers’ Representatives

• The National Association of Wholesaler-Distributors

• The National Retail Federation

• The Encyclopedia of Associations

Reseller Inquiries

Many firms learn about directinquiries from intermediaries

interested in handling their product.

This is the main source of information about potential new channel

members for some manufacturers.

Firms receiving the highest numberof inquiries are the more

prestigious in their industry.

ResellerInquiries

Customers

Customers are willing to give frank opinionsabout the intermediaries who call on them.

Manufacturer conducts formal or informal surveys ofcustomers’ views of various distributors.

Manufacturer obtains information aboutpotential intermediaries.

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Trade Shows

Wholesale and retail trade associations hold annual conventions.

Attending manufacturers have access to awide variety of potential channel members.

** Small manufacturers meet face-to-face withwholesalers & retailers.

Other Sources

1. Chambers of commerce, banks, & local real estate dealers

2. Classified telephone directories or the yellow pages3. Direct-mail solicitations4. Contacts from previous applications5. Independent consultations6. List brokers that sell lists of names of businesses7. Business databases8. The Internet

Selection Criteria

• Credit & Financial Condition• Sales Strength• Product Lines• Reputation• Market Coverage

• Sales Performance• Management Succession• Management Ability• Attitude• Size

Adapting Selection Criteria

Because no list of criteria is adequatefor a firm under all conditions,

the channel manager should be flexible when using selection criteria.

Who Selects?

Who does the selecting?

Producers & Manufacturers

Wholesale Intermediaries

Retail Intermediaries

Offering Inducements

Good, profitable product line

Advertising & promotional support

Management assistance

Fair dealing policies & Friendly relationships

Securing Channel Members

Product Line7

Product line inducements:

1. Manufacturer offers good product line withstrong sales & profit potential

2. Stress value of good product line fromchannel members’ perspective

7Advertising & Promotion

Consumer Market:Gain immediate credibility by using a strong program

of national advertising.

Advertising & promotion inducements

Industrial Market:Gain recognition by using a strong program of

trade paper advertising.

Management Assistance7

Prospective members want to know whether the Manufacturer will help with the following:

• training programs• financial analysis & planning

• market analysis• inventory control procedures

• promotional methods

Management assistance inducements:

Fair Dealing & Friendly Relationship

Manufacturer’s Responsibility:

To convey to prospective channel members thathe or she is genuinely interested in

establishing a good relationship based on trustand concern for their welfare as both business

Entities and as people

Channel structure and selection of channel members

Consumer Non-Durable Product: P&G

Channel Structure

Selection criteria for Stockists:

1. Investment capacity2. Storage space3. Location4. Span of control5. Market knowledge6. Infrastructure7. Support to the organization8. Orientation / Trustworthiness

Selection criteria for wholesalers:

1. Reliability2. Loyalty3. Ability to service retailers4. Willingness to work with stockist5. Other brands kept6. Other related products7. Delivery time8. Reach capacity9. Tendency to diversify

Channel structure and selection of channel members

Consumer Durable Product: Godrej and Boyce (G&B)

Channel Structure of G&B

Selection criteria for Dealers:

1. Prior business record2. The capability of maintaining and running his own showroom.3. Financial strength4. Inventory5. Contracts with customers6. Availability of salesforce and technicians

The appointment letter lays down several terms of the contract that have to be fulfilled by the dealer. The company expects the dealers not to sell any competitors’ products. The dealer is also expected to conduct his business only within the clearly demarcated sales territory allocated to him by the company. According to the Monopolies and Restrictive Trade Practices Act, a company cannot officially restrict the dealer to operate within a specific territory. The laws say that a retailer may not be prevented from selling his products in any territory he wishes. Hence, no such condition is explicitly laid down in the appointment contract. Territory demarcation is worked out by considering the size of the area or district as well as the sales potential of the region in terms of the number of offices, purchasing power of the domestic consumers,etc.

Maruti Udyog Ltd

Analyze requirement of a dealer

Pinpoint Geographical Location

Identify the kind of industries exist in that belt

Interaction with the other automobile dealer to analyze viability: Data Collection

Interaction with the opinion leaders to analyze viability: Data Collection

Now the choice is between : an existing dealer or a new one.

Selection of Dealers: background check / infrastructure / managerial resources / financial strength

Crompton Graves

The manufacturing units of Crompton Graves for pumps and motors are situated at Sewri atMumbai and at Ahmednagar. The goods are supplied directly to the stock points at every Branch. The flow of products is from the company-owned stock points at the branch level toThe exclusive dealers.

Selection Procedure for Dealers1. The company does not advertise for new dealers. Whenever the need to appoint a new dealer for an area is felt, the word is spread around. This is done as the type of dealers who sell pumps and motors are mostly concentrated in one locality in every town or city.

2. The interested dealers are asked to make a presentation before the Branch Manager and the Group Marketing Manager as to how they would be able to serve Crompton.

3. The selection is then done on the basis of the following criteria:

• Financial strength: The capability of the dealer to hold sufficient stock as per the potential of the area both at present and in the future. Also, whether he/she would be able to pay the company’s dues on time.

• Workforce: The strength of the workforce for handling sales, delivery, stores handling, after-sales service, and so on. The quality of the workforce in terms of educational qualifications, technical competency and experience is also seen.

• Contacts: As the business for these types of products is done on the basis of contacts, contacts form a major basis for selection and include the present customers of the dealers, their experience in dealing with such customers and their overall contacts in the society.

• Floor space: Depending on the quantity of products to be stocked for the targeted sales, the floor space of the godown should be sufficient and located close to the market.

4. Feedback from the market is obtained through the Marketing Engineer network and the present dealer network. The feedback is sought for things like authenticity of the claims and the reputation of the person to be appointed.

5. An appointment is given to the selected dealers after they provide a security deposit. Every dealer is required to make a deposit with the company, which roughly works out to around three months of expected sales.

Grouping of Selection Criteria