Sales & Distribution Management
Chapter 21: Evaluating Channel Performance
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+Performance Measures in Marketing Channels
Channel Performance at a Macro Level
Channel Performance at a Micro Level
+Models to Diagnose Channel Profitability
Strategic Profit Model
Economic Value Analysis
+Appraisal of Channel Members’ Contribution
Activity based costing
Direct product profit
Result of Channel Performance
Chapter Summary
The performance of a channel can be measured across multiple dimensions. The parameters that are measured usually are effectiveness, efficiency, productivity, equity and profitability of the channel.
While channel efficiency emphasizes controlling costs incurred by intermediaries while performing channel functions, channel productivity is concerned with maximizing outputs for a given level of inputs. Channel effectiveness deals with the intermediary’s proficiency in satisfying customer needs and channel equity measures the distribution of accessibility of the channel among customers.
While performance at a macro- level is evaluated through societal contributions of intermediaries, a micro- level evaluation involves assessing the performance of individual intermediaries in terms of achieving the manufacturer’s objectives of goal attainment, integration, adaptation and pattern maintenance. The performance of intermediaries is measured on three scales, namely facet, global and composite scales.
In addition to an intermediary’s performance in meeting supplier aims, his or her channel profitability that is concerned with his or her financial performance is also evaluated. While the channel profitability is assessed using the Strategic Profit Model from a broader perspective, Activity Based Costing and Direct Product Profit are used for detailed analysis of channel performance. Another pivotal factor for channel performance is the quality of services offered through the channel.
Thus, the success of a channel and its efficiency are determined by the efficiency of channel intermediaries in delivering goods and services to customers and the quality of services offered in the process. An effective distribution channel can provide channel services demanded by customers and extend its capacity within the constraints of the market environment.
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