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Chapter 7
SELECTING THE CHANNEL MEMBERS
Teaching Notes
The focus of this chapter is the process of selecting the correct channel members
(described as “strong”) who can perform the distribution tasks most efficiently.
Emphasis should be placed on the delineation of the distribution tasks, prior channel
Chapter Objectives
The selection of channel members is the last (seventh) phase of channel design. The
selection process consists of three basic steps: (1) finding prospective channel members,
(2) applying selection criteria to determine whether these members are suitable, and (3)
securing prospective members for the channel.
1) Have an appreciation for the importance of channel member selection.
2) Understand the relationship between channel member selection and distribution
intensity.
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Chapter Topics
1) Channel Member Selection and Channel Design
Chapter Outline
Channel Member Selection and Channel Design
Channel selection decisions are frequently necessary even when channel structure
changes have not been made. Firms may need additional outlets to allow for growth or to
replace channel members that have left the channel.
The Selection Process
Three steps are involved:
1. Finding prospective channel members
Finding Prospective Channel Members
The most important sources for finding channel members are listed below in their order
of importance.
• Field sales organizations
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A) Field Sales Organizations
Company salespeople are in the best position to know potential channel members, usually
B) Trade Sources
Trade sources such as trade associations, trade publications, directories, trade shows, and
C) Reseller Inquiries
Many firms learn about potential channel members through direct inquiries from
intermediaries handling their products.
D) Customers
Customers of prospective intermediaries can be a source of information. Using informal
E) Advertising
F) Trade Shows
Trade shows or conventions can be a very fruitful source for finding potential channel
G) Other Sources
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Some firms also find the following sources helpful in locating prospective members.
a. Chamber of commerce, banks, and local real estate dealers
b. Classified telephone directories or yellow pages
Applying Selection Criteria
Having developed a list of prospective channel members, the next step is to appraise
A) Generalized Lists of Criteria
Brendel developed a list of 20 key questions for industrial firms to ask their prospective
channel members.
This list of questions is posed on page 231 of the text. You may want to open up the class
for discussion at this point and see if class members can add any additional questions to
this list or ask if this list is still applicable to today with the advent of the Internet.
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(1) commitment level, (2) financial strength, (3) marketing skills, (4) product-related
factors, (5) planning abilities, and (6) facilitating factors. These are referred to as “core
1) Credit and Financial Condition
2) Sale Strength
3) Product Lines
Manufacturers were generally found to consider four aspects of the intermediary’s
product line: (1) competitive products, (2) compatible products, (3) complementary
products, and (4) quality of the lines carried.
a) Manufacturers generally try to avoid intermediaries who carry directly
competitive product lines. Many times both wholesale and retail intermediaries
4) Reputation
Most manufacturers will flatly eliminate prospective intermediaries who do not enjoy a
5) Market Coverage
The adequacy of the intermediary in covering the geographical territory that the
manufacturer would like to reach is known as market coverage. Manufacturers will
attempt to get the best territory coverage with a minimum of overlapping.
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6) Sales Performance
7) Management Succession
8) Management Ability
Many manufacturers feel that a prospective channel member is not even worth
9) Attitude
This criterion applies mainly to a prospective intermediary’s aggressiveness, enthusiasm,
10) Size
Sometimes a prospective intermediary is judged on sheer size. The belief is that the
B) Using Lists of Selection Criteria
While checklists such as those described above are not applicable to all firms under all
Securing the Channel Members
It is important to remember that the selection process is a two-way street. It is not only
the producer and manufacturer who does the selecting – but also the intermediaries as
well.
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Figure 7.3 captures this partnership concept in an advertisement in DSN Retailing
Today.
A) Specific Inducements for Securing Channel Members
Generally, the more specific the manufacturer can be in spelling out what kinds of
support and assistance will be offered to channel members, the better.
1) Product Line
At the heart of what the manufacturer has to offer is a good product line with strong sales
and profit potential (to the intermediary). It is especially important for manufacturers
2) Advertising and Promotion
Prospective intermediaries also look to manufacturers for promotional support. Such
3) Management Assistance
Prospective channel members want to know whether the manufacturer is committed to
4) Fair Dealing and Friendly Relationship
A marketing channel relationship is not only a business relationship but a human
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Answers to Review Questions
3. “All possible outlets” is an iota less universal than it sounds in that it excludes at least
4. A wide variety of sources can be tapped for prospective channel members. The most
common are:
▪ Field Sales Organization: sales reps often are aware of, perhaps even in contact
with, intermediaries in their territories that are likely to be available.
▪ Trade Sources: trade associations, trade publications and directories are a source
5. The use of the sales force to find prospective channel members is likely to be
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6. The underlying purpose of this question is to elicit student discussion about the
futility of attempting to develop a truly universal list of selection criteria. Criteria are
different for particular manufacturers and intermediaries, and are subject to change
8. Each of the following general criteria for selecting channel members can be used as a
starting point for developing more specialized channel member selection criteria:
▪ Credit and Financial Condition: Will the prospective channel member be able to
pay its bills?
▪ Sales Strength: Does the prospective channel member have enough salespeople?
Are they of high enough quality? Do they have the technical competence needed
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9. The inducements the channel manager can use to persuade a prospective channel
member to join the channel fall into four categories:
▪ Product Line: The most basic and essential inducement is a product line that will
generate sales and profits for the channel member.
10. The essential idea in the so-called partnership between a producer or manufacturer
and its channel members is one of mutual support and benefit. That is, each of the
Commentaries on Issues for Discussion
1. An independent dealer network can provide a critical service and competitive
advantage for Apple by providing localized market expertise to the local target
markets of Apple computers. Apple benefits from the value quality retailers create in
in effectively promoting and servicing apple products. In addition, quality retailers
establish a channel which provides competitive positioning by placing Apple products
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2. Harding hardly should be surprised. He provided no motivation for his sales force.
The high performing salespeople have probably been rewarded on the basis of the
sales volume they produce, not on opening new accounts. Thus, when asked to
perform the duties of finding prospective channel members, they are reluctant to do
3. This situation is an opportunity for students to apply a general list of channel member
evaluation criteria to the specific situation at Rust-Oleum. One way to conduct this
discussion is to write Pegram’s criteria on the blackboard and, as a starting point, ask
4. The type of high-quality retailers Mitchell wants to handle its line could not be
clearer:
▪ hair care professionals
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5. While checklists such as those discussed in this chapter are not always applicable to
all firms, they are still valuable because they help point to many of the key areas of
consideration for selecting channel members. Ultimately, each firm’s management
must develop its own specific set of selection criteria based on its own objectives and
policies. Checklists outlining selection criteria for retailers would provide a good
First, it is likely that Nine West was chosen because of the geographical territory that
it covered. Generally, manufacturers will attempt to get the best territorial coverage
with a minimum of overlapping. This is an especially important consideration for a
manufacturer using highly selective distribution as is the case with New Balance‘s
high performance and high-quality athletic footwear.
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6. Master Lock expects its wholesale distributors to do a great deal. In effect, it expects
the distributors to relieve Master Lock from most of the “nuts and bolts” and
“headaches” involved in serving retail channel members. Therefore, the wholesale
distributors should expect substantial support from Master Lock in the form of