Part 2: Developing the Marketing Channel

CHAPTER 7
Selecting the
Channel Members

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 ① Channel member selection
② Selection and distribution intensity
Learning Objectives

③ Finding members
④ Selection criteria
⑤ Adapting selection criteria
⑥ Who selects
⑦ Offering inducements
⑧ Fair dealing and friendly relationships

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Objective
Channel Member Selection
1
Channel member selection – the 7th
and final phase of channel design

Selection may of may not be the

result of channel design

Channel member selection may

be to replace channel
members that have left…

OR

…to obtain greater coverage.

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Objective
Selection & Distribution Intensity
2

The greater the intensity of

distribution…

…the less the emphasis on

selection

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 The Selection Process

1. Finding prospective
channel members
2. Applying
selection criteria
to determine the
suitability of
prospective
3. Securing the channel members
prospective
channel members
as actual
channel members

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Objective
Finding Members
3
1. Field sales
organization

7. Other 2. Trade
sources sources

6. Trade 3. Reseller
shows inquiries

5. Advertising 4. Customers

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 Field Sales Organization

Salespeople are the

best positioned to
know about potential BUT:
intermediaries

• They are often able to • The manufacturer must

pick up information adequately reward
about likely salespeople for their
intermediaries. time & effort
• They may have lined up establishing
prospective connections.
intermediaries.

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 Trade Sources

For Example:
• Industrial Distribution
• Trade associations magazine
• Trade publications • The Verified Directory of
• Directories Manufacturers’
Representatives
• Trade shows
• The National Association of
• Firms selling similar Wholesaler-Distributors
products • The National Retail
• The “grapevine” Federation
• The Encyclopedia of
Associations

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 Reseller Inquiries

Many firms learn about direct

inquiries from intermediaries
interested in handling their product.

This is the main source of

information about potential new
channel
members for some manufacturers.

Reseller Firms receiving the highest number

Inquiries of inquiries are the more
prestigious in their industry.

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 Customers

Customers are willing to give frank opinions

about the intermediaries who call on them.

Manufacturer conducts formal or informal surveys of

customers’ views of various distributors.

=
Manufacturer obtains information about
potential intermediaries.

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 Advertising

Trade magazine advertising

can generate a large number
of inquiries from prospective
Members.

It therefore can provide a large

pool from which to make selections.

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 Trade Shows

Wholesale and retail trade associations

hold annual conventions.

Attending manufacturers have access to a

wide variety of potential channel members.

Small manufacturers meet face-to-face with

wholesalers & retailers.

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 Other Sources
1. Chambers of commerce, banks, & local real
estate dealers
2. Classified telephone directories or the yellow
pages
3. Direct-mail solicitations
4. Contacts from previous applications
5. Independent consultations
6. List brokers that sell lists of names of businesses
7. Business databases
8. The Internet

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Objective
Selection Criteria
4

• Credit & Financial • Sales Performance

Condition • Management
• Sales Strength Succession
• Product Lines • Management
• Reputation Ability
• Market Coverage • Attitude
• Size

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Objective
Adapting Selection Criteria
5
Because no list of criteria is adequate
for a firm under all conditions…

…the channel manager should be

flexible when
using selection criteria.

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 Who Selects?
Objective

6
Who does the selecting?

• Producers & Manufacturers

• Wholesale Intermediaries
• Retail Intermediaries

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 Securing Channel Members

. . . The supplier produces, the distributor

sells, and each is dependent upon the other.
Together they form a team, and teamwork
is essential if the association is to prove
mutually beneficial.

— Pegram

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Objective
Offering Inducements
7

Advertising & promotional support

Management assistance

Fair dealing policies &

Friendly relationships

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 Product Line

Product Line Inducements:

1. Manufacturer offers good product line with

strong sales & profit potential

2. Stress value of good product line from

channel members’ perspective

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 Advertising & Promotion

Advertising & Promotion

Inducements

Consumer Market:
Gain immediate credibility by using a strong
program of national advertising.

Industrial Market:
Gain recognition by using a strong program of
trade paper advertising.

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 Management Assistance

Management Assistance
Inducements:

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

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Objective
Fair Dealing &
8 Friendly Relationship

Manufacturer’s Responsibility:

To convey to prospective channel members

that he or she is genuinely interested in
establishing a good relationship based on trust
and concern for their welfare as both business
entities and as people

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 Discussion Question #1
Apple, with its almost 300 company-owned stores, uses independent
intermediaries, which it refers to as “third-party resellers.” For its Mac
computers, Apple is very careful about the intermediaries it selects to
become members of its distribution channel. Once selected, Apple makes
a substantial investment to enhance the capabilities of its chosen channel
members to sell and service Apple products. Its “Apple Sales Consultant
Program,” for example, places Apple employees at selected channel
members’ stores to provide expertise on how to tell the Apple story and
ensure a high-quality buying experience. The company also offers
extensive training and support through what it refers to as its “Apple
Premium Resellers Program” to selected channel members to help them
develop high levels of customer service and product expertise. Apple
strongly believes that providing high-quality sales and after-sales support
is critical for attracting new customers and retaining existing ones.

Do you think Apple’s careful selection of channel members and its

efforts to enable them to provide high-quality sales and service support
are as important as Apple’s unique products in creating a differential
advantage for Apple?
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 Discussion Question #3
The Rust-Oleum Corporation is world-renowned for its
anticorrosive coatings for virtually any application, for use on
everything from heavy industrial equipment to consumer patio
furniture. The company sells its industrial products through
wholesalers (industrial distributors) and its consumer products
through both wholesalers and retailers. Rust-Oleum has, for many
years, talked about doing business with its channel members by the
golden rule—“doing business together with sincerity, honesty and
cooperation.” The company is also fairly selective in its choice of
distributors, limiting the number selected to the fewest possible
needed to provide effective coverage of each market. In addition,
Rust-Oleum makes it a point to say that it sells through the
distributor, not just to him.

Given this approach to dealing with channel members, what

criteria do you believe would be especially important for Rust-Oleum
Corporation to emphasize in selecting prospective channel
members?
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 Discussion Question #6
Master Lock is perhaps the nation’s best-known name in
padlocks. Master Lock padlocks are sold intensively at the retail
level through a wide range of stores, including hardware stores,
home centers, automotive stores, bicycle shops (for bicycle
padlocks), drugstores, supermarkets and many others. This wide
retail network is supplied largely through wholesalers. Master
Lock relies on wholesalers to provide the bulk of the sales and
logistical support to the retail channel members. When retailers
need help in ordering, stocking the right assortment, choosing
point-of-purchase displays or advertising to consumers, Master
Lock tells them to “ask your Master Lock distributor for all the
advice and support you need.”

Given that Master Lock expects its wholesale distributors to

provide virtually all the support needed by retailers, what kind of
support do you think the wholesaler distributors should expect
from Master Lock?
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