CHAPTER EIGHT

MOTIVATING THE CHANNEL MEMBERS

In this chapter we begin with the premise that a channel structure with channel members capable
of serving the target markets effectively and efficiently has already been developed. At this
point, then, the channel manager needs to stress the realization of this potential. Thus, managing
the marketing channel becomes the main focus of attention. Channel management can be
defined as the administration of existing channels to secure the cooperation of channel members
in achieving the firm’s distribution objectives. Three points should be particularly noted in this
definition.

First, note that channel management deals with existing channels; that is, we are assuming that
the channel structure has already been designed (or it has evolved) and that all of the members
have been selected. Channel design decisions are therefore viewed as separate from channel
management decisions. In practice, this distinction may be obscured at times. This is
particularly the case when a channel management decision quickly lapses into a channel design
decision. For example, a price incentive used to secure the cooperation of some channel
members (channel management decision) may fail to do the job. This may result in management
considering the possibility of changing to other types of channel members (channel design
decision). Perhaps this distinction can be grasped best by thinking of channel design decisions as
concerned with “setting up” the channel, whereas channel management deals with “running”
what has already been set up.

The second point covers the phrase secures the cooperation of channel members. Implied in this
is the notion that channel members do not automatically cooperate merely because they are
members of the channel. Rather, administrative actions are necessary to secure their
cooperation. If a manufacturer enjoys substantial cooperation from channel members without
having to administrate, this is not managing—it is simply a matter of being lucky.

Third, distribution objectives are statements describing the part that the distribution comment of
the marketing mix is expected to play in achieving the firm’s overall marketing objectives. In
the context of managing the channel, carefully delineated distribution objectives are needed to
guide the management of the channel.

Clearly, without knowing what the objectives are, it is difficult for the channel manager to know
what direction to pursue in managing the channel.

In this chapter we will examine one of the most fundamental and important aspects of channel
management—motivation refers to the actions taken by the manufacturer to foster strong channel
member cooperation in implementing the manufacturer’s distribution objectives.

BY: Asaminow G.@DKU Marketing Distribution and CH-8 1

Logistics Management 2016 E.C
The discussion is structured around three basic facets involved in motivation management in the
channel. These are:

 Finding out the needs and problems of channel members

 Offering support to the channel members that is consistent with their needs and problems
 Providing leadership through the effective use of power
8.1 Finding out the Needs and Problems of Channel Members

Before the channel manager can successfully motivate channel members, an attempt must be
made to learn what the members want from the channel relationship. They may perceive needs
and face problems quite different from those of the manufacturer. McVey has pointed to these
differences with several classic propositions that can be summarized as follows:

1. The middleman does not consider himself a “hired link in a chain forged by the
manufacturer.”
2. The middleman acts first and foremost as a purchasing agent for his customers, and only
secondarily as a selling agent for suppliers. His interest is in selling whatever products
his customers wish to buy from him.
3. The middleman views all the products he offers as a “family” of items that he sells as a
packaged assortment to individual customers. He directs his selling efforts primarily at
obtaining orders for the assortment, rather than for individual items.
4. Unless given some incentive to do so, the middleman will not maintain separate sales
records by brands sold. Information that might be useful to manufacturers in product
development, pricing, packaging, or promotion planning is “buried” in the middleman’s
own records, sometimes even purposely kept from suppliers.

Approaches for learnings about channel member needs and problems

All marketing channels have a flow of information running through them as part of the formal
and informal communication systems that exist in the channel. The following figure provides an
overview of most of the major components that go into making up a typical channel
communications system.

Ideally, such a channel communications system would provide the manufacturer with all of the
information needed on channel member needs and problems. Given the many sources in the
channel communications system from which information can be generated, one might think it
unlikely that any important information can be generated; one might think it unlikely that any
important information would be missed. In practice, however, this is far from true. Most
marketing channel communication systems have not been formally planned and carefully
constructed to provide a comprehensive flow of timely information. Rather, in many cases they
have evolved haphazardly over a period of years with little thought given to correcting
imperfections in the systems. And even those channel communication systems that have been

BY: Asaminow G.@DKU Marketing Distribution and CH-8 2

Logistics Management 2016 E.C
carefully planned and improved are a long way from being perfect. Consequently, the channel
manager should not rely solely on the regular flow of information coming from the existing
channel communication system for accurate and timely information on channel member needs
and problems. Rather, there is a need to go beyond the regular system and make use of one or all
of the following four additional approaches for learning about channel member needs and
problems:

1. Research studies of channel members conducted by the manufacturer,

2. Research studies by outside parties,
3. Marketing channel audits, and
4. Distributor advisory councils.
Research Studies of Channel Members—while it has become fairly common for
manufacturers to conduct research studies dealing with their ultimate customers—to learn the
kinds of products that customers want, what their brand preferences are, the kinds of shopping
behaviors they engage in, and many other types of information—research studies of channel
member needs and problems are much rarer. Indeed, most manufacturers—even large and
sophisticated ones—never conduct such research at all.

Marketing Channel Audits—as with the periodic accounting audit, which virtually all
firms have performed, the channel manager can conduct a marketing channel audit periodically.
The basic thrust of this approach should be aimed at gathering data on how channel members
perceive the manufacturer’s marketing program and its component parts, where the relationships
are strong and weak, and what is expected of the manufacturer to make the channel relationship
viable and optimal. For manufacturer may want to gather data from channel members on what
their needs and problems are in such areas as:

1. Pricing policies, margins, and allowances

2. Extent and nature of the product line
3. New products and their marketing development through promotion
4. Servicing policies and procedures such as invoicing, order dating,
5. Sales force performance in serving the accounts.

Further, the marketing channel audit should identify and define in detail the issues relevant to the
manufacturer-wholesaler and/or manufacturer-retailer relationship.
Another point to note involves cross-referencing. Whatever areas and issues are chosen for a
particular marketing channel audit, ideally they should be cross-tabulated or correlated as to kind
of channel members, geographical location of channel members, sales volume levels achieved,
and any other variables that might be relevant.

Finally, for the marketing channel audit to work effectively, it must be done on a periodic and
regular basis so as to capture trends and patterns. Only in this way will it be possible to keep

BY: Asaminow G.@DKU Marketing Distribution and CH-8 3

Logistics Management 2016 E.C
track of those issues that remain constant, those that dissipate, or those that enlarge in scope.
Emerging issues are also more likely to be spotted if the audit is performed on a regular basis.

Distributor Advisory Councils—another effective approach for learning about channel

member needs and problems is to set up a distributor advisory council. These councils should
consist of top management representatives from the manufacturer as well as representatives of
the principals from the Channel members. The top management people might consist of the vice
president of marketing, general sales manager, and other top members of sales management.

The distributor members should consists of a representative sample of distributors such as 5 to

10 percent of the total. However, all parties should limit the total number to allow for full
participation and exchange of dialog. In setting up a distributor advisory council provides a
vehicle for identifying and discussing mutual needs and problems that are not transmitted
through the regular channel information flow.
Three significant benefits emerge from the use of a distributor advisory council:

 It provides recognition for the channel members.

 It provides a vehicle for identifying and discussing mutual needs and problems that are
not transmitted through the regular channel information flow
 It results in an overall improvement of channel communications, which in turn helps the
manufacturer to learn more about the needs and problems of channel members, and vice
versa.

8.2 Offering Support to Channel Members

Support for channel members refers to the manufacturer’s efforts in helping channel members to
meet their needs and solve their problems. Such support, if properly applied, should help to
create a more highly motivated group of channel members.

Unfortunately, support for channel members is all too often offered on a disorganized and ad hoc
basis. When channel members appear to lack motivation they are “pumped up” with an extra
price incentive, advertising allowance, dealer contest, or even a pep talk by the manufacturer. Or
if they are having a problem in a particular area, the manufacturer may attempt to “patch it up”
and hope that the problem will not come back again—at least for a little while.
McCammon implied the attainment of a highly motivated cooperating “team” of channel
members in an inter-organizational setting requires carefully planned programs. Such programs
for providing channel member support can generally be grouped into one of the following three
categories:

 Cooperative,
 Partnership or strategic alliance, and
 Distribution programming.

BY: Asaminow G.@DKU Marketing Distribution and CH-8 4

Logistics Management 2016 E.C
While all three of these approaches should emphasize careful planning, the level of sophisticated
and comprehensiveness of the approaches varies greatly. The cooperative approach represents
the least sophisticated and comprehensive approach to channel member support, whereas
distribution programming is the most sophisticated and comprehensive. The partnership or
strategic alliance approach would generally fall somewhere between the other two.

Cooperative Arrangements—between the manufacturer and channel members at the

wholesale and retail levels have traditionally been used as the most common means of
motivating channel members in conventional, loosely aligned channels. The types of
cooperative arrangements or deals are quite diverse and are limited only by the creativity of the
manufacturer.

Partnerships and Strategic Alliances—stress a continuing and mutually supportive

relationship between the manufacturer and its channel members in an effort to provide a more
highly motivated team, network, or alliance of channel members in an effort to provide a more
highly motivated team, network, or alliance of channel partners. The traditional “us-against-
them” mentality is replaced with a new, cooperative perception of “us” in an effective channel
partnership or strategic alliance.

Distribution Programming—is the most comprehensive approach for achieving a highly

motivated channel team. Distribution programming goes well beyond the typical partnership or
strategic alliance because it deals with virtually all aspects of the channel relationship.
McCammon, who pioneered the concept of distribution programming, defines it as: A
comprehensive set of policies for the promotion of a product through the channel.

The essence of this approach is the development of a planned, professionally managed channel.
The program is developed as a joint effort between the manufacturer and the channel members to
incorporate the needs of both. If done well, the program should offer all channel members the
advantages of a vertically integrated channel while at the same time allowing them to maintain
their status as independent business firms.

8.3 Providing Leadership through the Effective Use of Power

Even if the channel manager has developed an excellent system for learning about channel
members' needs and problems, and no matter what approach is used to support them, control
must still be exercised through effective leadership on a continuing basis to attain a well-
motivated team of channel members.

Seldom is it possible for the channel manager to achieve total control, no matter how much
power underlies his or her leadership attempts. This state would exist only if the channel

BY: Asaminow G.@DKU Marketing Distribution and CH-8 5

Logistics Management 2016 E.C
manager were able to predict all events related to the channel with perfect accuracy, and achieve
the desired outcomes at all times. For the most part, this is a theoretical state not achievable in
the reality of an inter-organizational system such as the marketing channel.

Little explained succinctly the problems of achieving very high levels of control and leadership
in this inter-organizational setting:

Because firms are loosely arranged, the advantages of central direction are in
large measure missing. The absence of single ownership, or close contractual
agreements, means that the benefits of a formal power (superior, subordinate)
base are not realized. The reward and penalty system is not as precise and is less
easily affected. Similarly, overall planning for the entire system is uncoordinated
and the perspective necessary to maximize total system effort is diffused. Less
recognition of common goals by various member firms in the channel, as
compared to a formally structured organization, is also probable.

As Little points out, the inter-organizational setting of the marketing channel creates a set of
conditions that makes strong leadership more difficult to achieve. This is particularly the case in
channels that have evolved as a group of loosely aligned firms. But even in channels that have
been designed to foster a higher degree of control, such as those based on contractual
commitments or distribution programming, the special circumstances attendant to inter-
organizational systems discussed by Little do not completely disappear.

Thus, even though the basis for control through strong leadership is significantly greater in
formally structured or contractual channels, such as in franchised channels, it does not often
equal the level achieved in an intra-organizational setting. This is not meant to suggest that the
channel manager cannot hope to exercise a high level of leadership in an effort to motivate
independent channel members. Rather, it is simply pointing out that, in attempting to do so, the
channel manager will face a more difficult set of problems.

BY: Asaminow G.@DKU Marketing Distribution and CH-8 6

Logistics Management 2016 E.C