Previously, you learnt about the various channel partners and distribution strategies that can be

used by a company to reach their end customer. You also learnt how to design a distribution

channel that matches the product in hand appropriately.

By now, you must have established the importance of channel partners in the smooth functioning

of a distribution channel.

In this session, you will learn the following:

1. Select a channel partner

2. Onboard a channel partner

3. Achieve channel longevity and minimise channel conflict

4. Manage distributor lifecycle

5. Evaluate a channel partner

Following are the important elements that should be considered while selecting a channel partner:

● Ability and willingness to invest

● A good reference

● Ability to service the target market

● Number and quality of sales reps

● Dealings with complementary or competing products

● Age of owner

● Digital savviness

● Market hold

Later, you learnt how to successfully onboard a new channel partner.

The considerations that should be prioritised while onboarding a new channel partner are as

follows:

1. Induction to business policies and procedures

2. Introduction to financial stakeholders

3. Introduction to marketing stakeholders

4. Preparation of a joint business plan

5. Market launch of the channel partner

6. Reporting norms

In this segment, you learnt that channel longevity is the duration for which a channel partner

works with the parent company.

The benefits of channel longevity are as follows:

● Helps in achieving revenue objectives

● Facilitates better market servicing

● Helps build excellent trade relationships

● Ensures consistency in performance

● Enables consistent gain and growth in market share

● Helps absorb unforeseen shocks

● Helps build loyalty

● Helps free up time by introducing auto mode operations

● Helps drive new initiatives

● Helps with new product launches

Companies facilitate channel longevity in the following ways:

● Ensure actual ROI equals the proposed ROI

● Set up an effective claim disbursement and settlement process

● Ensure effective market coverage

● Conduct regular interactions

● Follow a standard margin structure to avoid undercutting

● Minimise month-end billing

● Roll out a reward and recognition system

● Be vigilant of market operating prices (MOPs)

● Maintain standard operating procedures

Earlier, you next learnt about the following important transactions which occur between a parent

company and a partner company:

1. Return on investment (ROI) is the first and biggest financial agreement between a parent

company and a partner company. It is necessary to compensate the distributor for

investment in infrastructure, time and effort. This is done by successfully agreeing upon a

credit period.

2. Attractive incentives are guaranteed for achieving certain sales targets.

3. Point-of-sale activities

4. Stock returns

One of the issues which a company can face with a channel partner is undercutting. This happens

when a distributor leverages discounts to a level low enough to eliminate competition.

Through the following indicative example of METRO cash and carry, it was illustrated how

undercutting could take place.

Some of the key evaluation parameters are as follows:

1. Sales quota attainment

2. Average inventory level

3. Customer delivery time

In addition, some of key evaluation metrics that can be tracked are as follows:

● Market share

● Numeric distribution

● Value-weighted distribution

● Stock turnover ratio

You can again work through the following examples which better illustrate each evaluation metric.

Market Share

Numeric Distribution

Value-Weighted Distribution

Stock Turnover Ratio

By putting yourself into the shoes of the hypothetical Fooddeliver.com business, you first

understood the problem they were facing, which was to choose between the following two

options:

Plan A: The company will appoint its own delivery boys on their payroll.

Plan B: The company will appoint delivery boys as commissioned agents.

You evaluated both these options in detail to understand which option best suits Fooddeliver.com.

The key findings from the case study was as follows:

The two key parameters to consider when choosing a distribution strategy is cost and control.

Companies in a situation similar to fooddeliver.com would mostly benefit from choosing a hybrid

model with features of both Plan A and Plan B.

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