Chapter 14
EVALUATING CHANNEL MEMBER PERFORMANCE
Teaching Notes
This chapter covers the evaluation of channel members, the factors affecting their
performance and the evaluation criteria that can be used. A significant portion of the
Chapter Objectives
The scope and frequency of channel member performance evaluations are affected by (1)
the degree of manufacturer’s control over the channel members, (2) the relative
importance of channel members, (3) the nature of the product, and (4) the number of
channel members involved.
While many criteria can be used to evaluate channel member performance the most basic
Corrective actions should be taken for those channel members who do not meet minimum
performance standards. The channel manager should attempt to uncover why these
problems exist (the underlying cause) and help channel members to solve these problems.
Learning Objectives
1) Recognize the importance of evaluating channel member performance.
2) Be familiar with the factors that limit the scope and frequency of evaluations.
Evaluating Channel Member Performance
Chapter Topics
1) Factors Affecting Scope and Frequency of Evaluations
Chapter Outline
The success of the firm in meeting its objectives depends on how well the firm’s
independent channel members perform. In evaluating channel members, the channel
Factors Affecting Scope and Frequency of Evaluations
Four factors affect the scope and frequency of channel member evaluations: (1) degree of
the manufacturer’s control over the channel members, (2) relative importance of the
channel members, (3) nature of the products, and (4) number of channel members.
A) Degree of Control
B) Importance of Channel Members
For the manufacturer who sells all of its output through intermediaries, the evaluation of
Marketing Channels 8e
14-3
C) Nature of the Product
Generally, the more complex the product is, the broader the scope of the evaluation, and
D) Number of Channel Members
For the manufacturer using intensive distribution, channel member evaluation may be
Performance Evaluations versus Day-to-Day Monitoring
The first type of evaluation is basically a routine, day-to-day monitoring of the
performance of the channel members based almost exclusively on sales criteria.
Channel Member Performance Audit
Key Term and Definition
▪ Channel member performance audit: A periodic and comprehensive review of
channel member performance.
A) Developing Criteria
Many possible criteria can be used. Most manufacturers use a combination of the
following: sales performance, inventory maintained, selling capabilities, attitudes,
Evaluating Channel Member Performance
A) Sales Performance
Sales performance is the most important and commonly used criterion for evaluating
channel member performance.
In examining the channel member’s sales performance, the channel manager should
distinguish between:
▪ Sales of the manufacturer to the channel member
The channel manager should evaluate sales data in terms of the following:
▪ A comparison of the channel members’ current sales to historical sales. Here the
channel manager should look for both total figures and specific figures by product
2) Inventory Maintenance
Maintaining an adequate level of inventory is another major indicator of channel member
performance. Essentially, the manufacturer wants the channel member to live up to its
obligations regarding inventory-stocking requirements.
Marketing Channels 8e
14-5
Table 14.2 shows key questions used for evaluating channel member inventory
performance.
3) Selling Capabilities
Many manufacturers believe it is worthwhile to evaluate channel members’ sales
capabilities more directly by appraising their salespeople.
The manufacturer should pay attention to such factors as:
▪ The number of salespeople the channel member assigns to the manufacturer’s
line. This provides insight into the exposure and market coverage the
4) Customer Service and Technical Support Capabilities
For channel members whose customers require substantial levels of customer service
5) Attitudes of Channel Members
The importance of favorable channel member attitudes toward the manufacturer and its
6) Competition
The channel manager should consider two types of competition when evaluating channel
member performance:
▪ Competition from other intermediaries. This helps put channel member’s
performance in perspective. If it turns out that the territory is composed of
members. The main question to evaluate here is the relative support offered by
Evaluating Channel Member Performance
14-6
7) General Growth Prospects
In periodically evaluating channel members in terms of the growth prospect, the channel
8) Other Criteria
The most important of these criteria is the financial status of channel members, their
character and reputation, and the quality of service offered by channel members to their
customers.
Table 14.4 shows the “dollar and cents” issues associated with economic satisfaction.
B) Applying Performance Criteria
There are essentially three approaches that may be used:
1) Separate performance evaluations on one or more of the criteria
Marketing Channels 8e
14-7
1) Separate Performance Evaluations
Separate performance evaluations measure channel member performance against one or
2) Multiple Criteria Combined Informally
This approach attempts to combine the various criteria into an overall judgment about
channel member performance. The various performance measures are combined only in
an informal and qualitative manner; that is, the relative importance and weights assigned
3) Multiple Criteria Combined Formally
A formal rating system using multiple criteria enables the channel manager to arrive at an
overall quantitative performance rating for each channel member.
This approach consists of the following five steps:
1. Criteria and associated operational measures are decided on.
Table 14.6 illustrates this method.
Evaluating Channel Member Performance
14-8
Table 14.7 shows this method.
The major advantages of this approach are that the weights assigned to the criteria and
the associated operational performance measures are made explicit, and an overall
quantitative index of performance is obtained.
Tables 14.8 and 14.9 show some ways channel managers can use this method.
At this point in the lecture, the instructor may want to spend some additional time going
over Tables 14.6, 14.7, 14.8, and 14.9 to illustrate how these numbers are calculated and
C) Recommending Corrective Actions
In general, manufacturers should try to recommend corrective actions to improve the
performance of channel members who are not meeting minimum performance standards.
Answers to Review Questions
1. While students may take either side of this issue, a strong case can be made for
agreeing with this statement. As we have pointed out so many times in the text, most
2. The four major factors affecting the scope and frequency of channel member
performance evaluations are:
a. The degree of the manufacturer’s control over the channel members: Generally,
Marketing Channels 8e
14-9
3. Channel member performance evaluation refers to a comprehensive analysis of the
channel members’ performance using several criteria in addition to sales. Day-to-day
4. No. Sales to channel members may not be a good indicator of sales by the channel
members because a large portion of the products accounting for the sales to the
channel members may still be in the channel members’ inventories. Only in cases
5. Rather than rely on records of sales from the manufacturer to the channel member,
the channel manager should seek data on sales from the channel member to its
customers. That data should be sought on a product level where possible.
6. If the channel members fail to meet inventory-stocking requirements, more of the
burden of holding inventory will be shifted back to the manufacturer increasing its
Evaluating Channel Member Performance
14–10
7. If capabilities were measured only by achievement, no student ever would hear about
being an underachiever and no Type A person would hear about being an
overachiever. Further, looking only at current and past sales is shortsighted; historical
8. Channel member attitudes are an important criterion because attitude can often be a
good barometer of future sales performance. In short, if a channel member’s attitude
9. Among the most important questions the channel manager should consider on
channel member growth prospects are: (1) past performance, (2) performance relative
10. This question is best handled as either an outside assignment or an in-class “debate”.
In an outside assignment, students can prepare a short paper on the pros and cons of
Commentaries on Issues for Discussion
1. The answer here is very straightforward and simple. Southland has virtually total
14–11
2. This issue focuses on one of the important criteria of channel member performance –
the level and kind of inventories stocked. Black & Decker expects the distributors of
its industrial products to carry a very full line of products so as to provide customers
with a wide choice and, of course, to increase Black & Decker’s sales relative to
3. The difficulties described in this issue apply to far more than just channel member
evaluations. They apply in any dynamic situation and in any subjective or qualitative
4. In answering this question, students should first begin by examining some of the
characteristics that Midas® has over its franchisees in terms of being able to change
policies regarding muffler replacements.
First, Midas has a strong degree of control over its franchisees by contractual
Evaluating Channel Member Performance
14–12
make up the “lost” profits on “muffler replacements”). The competitive nature of the
automobile market with the influx of extended warranties on automobiles, or the
5. Communication is the vehicle for all interactions among the channel members, whether
such interactions are cooperative or conflicting. A foul-up or breakdown in
communications can quickly turn a cooperative relationship into a conflicting one. In
this case, Holiday Inn is accused of blindsiding the 700 Holiday Inn franchisees who