Introduction
What, why and how of the channel and channel design were seen in the previous chapters. In this chapter, I will take you through the essential questions of what happens in channel management post the channel has been designed.
After the firm has designed the marketing channel based on the principles mentioned in the earlier chapters, the next vital step is to get the channel into action. Certain decisions are to be taken for the endeavour to be a success.
The parameters to make the chosen channel a success will be described here. The first question that comes into mind is, what is channel management?
What is Channel Management?
Gartner sales glossary defines channel management as a company's engagement activities related to selecting, enabling and compensating indirect channel partners1. As we have already seen in chapter 3, once the companies go through various channel design decisions, they eventually conclude with a channel strategy.
After the company or the firm chooses a channel system, certain activities are done to ensure that the channel meets its objectives. These activities, in essence, make up the channel management decisions.
Elements that make up the Channel Management Decisions
The following are the important elements which entails the decisions which are to be taken during channel management
I) Selecting Channel Members: Selecting the channel members would be the most crucial decision the manufacturer will take. The channel management decision will be taken keeping the following things in mind:
a) if the firm's values will be taken to the end consumer by the channel members and thus form the face of the organization itself?
b) Any backlash the company might incur can be because of a small mistake done by the final channel member, and this would mean loss of reputation
c) Characteristics that should be kept in mind while selecting the channel members
- Number of years in business- gives an idea of intermediaries' consistence performance.
- Financial record- gives an idea of their creditworthiness.
- Service reputation gives a picture of their credibility to carry the brand forward.
- Location-gives an idea of whether they can meet the sales targets.
- Growth potential- the growth of intermediary, gives an idea of potential growth on that particular channel.
- Cooperativeness-given an idea of how easy or difficult it would be to perform business with the intermediary.
II) Training of Channel Members: This part of the channel management decision can be looked at it an HR ft. The marketing aspect of Marketing Channel Strategies. Training the channel members to perpetuate the company's values among the intermediaries effectively will improve performance.
A few methods by which a behavioural change can be brought about among the intermediaries. These are classical influence techniques seen in the HR domain which showcase how higher-ups can use power to bring about change. Types of power are:
Coercive power: Can be used to ascertain authority via force of severe repercussions if not cooperating
Reward power: performance-linked bonuses can be given. If the stick in the above situation didn't work, the carrot here would be bringing about the change.
Legitimate power: source of power from legal provisions. One difference between coercive power and legitimate power would be that in coercive power, one uses forces, but in legitimate power, one reiterates the positions of legal avenues
Expert power: the technical know-how of the product lies with the manufacturer, which can be leveraged to pass on the knowledge to the channel intermediaries.
Based on the situation, any one of the above powers can change channel members to motivate and perform better.
III) Evaluating Channel Members: In chapter three, we spoke of how X responsibilities given to the intermediaries have Z financial implications on the firm. Every channel member should be periodically evaluated to see if the channel of sale is still profitable after the expenses. The parameters to assess the members would be
- Sales attainment quota: if the sales targets are met
- Average inventory levels: will give us an estimation of movement of goods on one particular channel via that specific channel member
- Customer delivery time and costs associated with the return of damaged products on the channel.
IV) Channel Evolution: Channels evolve. Towards the end of the third chapter, we saw that adaptability of the channel should be a prime consideration in channel design decisions. This adaptability is not just due to external factors but also due to internal concerns.
During the channel life cycle, the products reach keeps increasing till the maturity phase is reached. This growth should be predicted to keep the channel delivery load optimal for each stage.
V) Channel Modification decision: While channel evolution is accommodating the natural progression of the product life cycle, channel modification decisions would be to accommodate any unseen changes which might necessitate the robustness in the channel.
VI) Global Channel Consideration: Future chance of expansion will also be in the back of the mind when deciding the channel and further while maintaining the channel
Conclusion to Channel Management Decisions
This chapter has seen various channel management decisions that the firms must keep in mind while designing the marketing channels. In the next chapter, I will talk about the integration of multiple channels.