The success of the company depends upon the effectiveness of the distribution channel. Thus it is mandatory for the company to keep on evaluating the performance of the channel partners. The criteria of evaluation are based on factors like the achievement of targets, an average level of inventory, the number of complaints attended, and so on.
- The accomplishment of customer service by the channel system as targeted by the company.
- The cost-effectiveness of the network for their defined jobs.
- The level of performance by the channel members is based on the quality and timings of delivery.
- The process of performance measurement is followed by the system and its transparency to the channel partner.
- The feeling of channel members regarding fair and equitable treatment by the company for remuneration and return on investments for the services provided by them.
- The capacity of the channel system to motivate low performers to use their potentiality.
- The ability of the channel system to take action on complaints and take corrective measures for the future.
Channel Performance Evaluation
Factors affecting the scope and frequency of channel performance evaluations:
- Degree of Manufacturer’s Control Over Channel Members
- Importance of Channel Members
- Nature of Product
- Number of Channel Members
Degree of Manufacturer’s Control Over Channel Members
The degree of control the manufacturer has over the channel members is generally governed by the contracts signed between the parties. The higher the control of the manufacturer over the channel members the easier will be the evaluation process.
Importance of Channel Members
The manufacturer who solely depends on intermediaries to sell its products, evaluates the channel members more comprehensively as the success of the firm is dependent on the performance of the channel member’s performance.
However manufacturers who have their own retail outlets for the majority of the portion of their sales and use intermediaries to serve only a small portion of the market sales may not opt for a detailed evaluation of the channel’s performance.
Nature of Product
The evaluation process is broader for products that are more complex. For products having high unit value, the loss or gain of a single order has a huge impact on the manufacturer.
Number of Channel Members
If the company has an intensive distribution system the manufacturer may not opt for a detailed evaluation process as the number of channel members is high.
However, if the company has a selective distribution system, the company will have access to all the details of the channel members because of the close proximity with their partners, and as such the company may conduct a comprehensive evaluation of their performance.
Channel Performance Evaluation Criteria
The main purpose of channel members is to make the products available and visible in the market. The performance of channel members thus depends on these two primary responsibilities of the channel member. The company can perform channel evaluation on those members who are on contract with the company.
It is not possible for the company to conduct performance evaluations on independent wholesalers and retailers. Some of the criteria for evaluation and their respective performance measures are stated below:
|Criteria for Evaluation||Popular Performance Measure|
|1. Sales Target Achievement||Primary Sales
Secondary Sales (FMCG)
Market Share Achieved
|2. Inventory Management||Inventory Turnover
Average level of Inventory
|3. Selling Resources||Number of salesperson
Target achieved by salespersons
Productive calls made per day
|4. Market Coverage||Support to new product launch
Support to promotions
Extension of credit
|5. Back Office Support||Trained man-power of computers
Maintenance of reports and records
Channel evaluation is important as it enables the company to know about the performance of its channel members which leads the company to take corrective actions and motivate its channel members for better performance in order to create a performing organization.