Evaluation of Channel Performance

Evaluating channel information system effectiveness is one of the significant outcome for the success of CIS. More and more companies are adopting multiple channels of distribution. Hence, sales managers need metrics that can help them to assess the performance of each sales channel, as well as the inter-relationships among the various sales channels adopted by them.4 These metrics should be should be  objective,constructed on accurate data, easy to quantify, and should have diagnostic value for the organization.5 The commonly used performance criterias for evaluating channel performance are:

Sales Performance. Sales performance is an important criteria for measuring channel performance. Company can look into the factors like primary sales, secondary sales, achievement of sales target, customer coverage, sales growth by period, sales to expense ratio, and market share to measure the channel performance.

Customer Management. New customer acquisition, customer retention, and increased share of wallet are important indicators of effective channel management. Many companies use third parties to measure the customer satisfaction index. Another performance indicator is increased share of business by the customers and channel partners.

Inventory Management. Inventory management is related to the distri­bution and production costs. Increased inventory levels can increase the cost of storage for the company and decreased inventory levels can result in stock-outs of the products, and hence, it is vital to effectively manage the inventory levels. Company can look into factors like average level of inven­tory maintained with the channel partners, inventory turnover, inventory cost, and sales of slow-moving and fast-moving products in the market.

Selling Resources. Effective utilization of selling resources is another important criteria to evaluate the channel performance. Here, the company can look into factors like number of salespersons in the field, sales-target achievement by each salesperson, sales revenue per month per salesper­son, selling expenses ratio, business from different customer segments, use of selling resources, and sales of high-margin products.

Customer Coverage. It is important to calculate the customer coverage. We can consider the factors like number of customer calls, number of field days, adherence to planned frequency of customer visits, and geographic coverage. Sales managers must analyze the qualitative and quantitative aspects of the customer coverage to improve sales force effectiveness.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.

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