Objectives and Methods of Manufacturer-Channel Partners’ Cooperation

The manufacturer and its channel partners share a common objective—to sell the manufacturer’s products at a profit. To achieve this objective, man­ufacturers set more specific objectives. These objectives, of course, differ with the marketing circumstances, even though many variations of specific objectives fit into definite categories. Manufacturers undertake cooperative programs (1) to build distributive network loyalty, (2) to stimulate distrib­utive outlets to greater selling effort, (3) to develop managerial efficiency in distributive organizations, or (4) to identify the source of supply for the product line at the final buyer level.

Methods used to achieve these objectives differ from manufacturer to manufacturer and from time to time, and some aim to accomplish more than one objective. The selection of methods of cooperation depends upon the manufacturer’s particular problem(s). The following discussion identi­fies circumstances leading to the choice of specific objectives and methods of manufacturer-distributive network cooperation.

1. Building Channel Partners Loyalty to the Manufacturer

Whether channel partners actively promote, simply recommend, or just handle the product line depends upon their relationships with the manu­facturer and its sales force. If they value these associations, the manufactur­er’s chances of securing active promotion are good. If they stock the prod­uct line merely for the convenience of their customers, it is more difficult for the manufacturer to capitalize on market opportunities. Occasionally, through heavy advertising and promotion to final buyers, the manufacturer pulls a product through the marketing channel despite adverse attitudes of channel partners. But if the outlets are forced to handle the product, marketing costs are often high. In the long run, it is less costly and more effective to have the cooperation of channel partners.

The most serious situations occur when channel partners are hostile to the manufacturer and its product. Many manufacturers who experience this difficulty have little personal contact, such as through salespeople, with the outlets handling their product. Some pull their products through marketing channels by liberal expenditures for advertising to final buy­ers. They believe that a product is certain to sell if a strong final buyer preference or recognition develops, but they underestimate the importance of having the goodwill of channel partners. Outlets stocking products only because the number of calls generated through advertising forces them to do so may give the product the least desirable shelf or counter positions, or even put it under the counter. They give competing products better shelf positions and more space, and they sell substitutions when final buyers ask for the manufacturer’s brand. This circumstance is even more serious when the brand possesses few features that differentiate it from competi­tors’ offerings.

In short, in many situations a manufacturer meets sales resistance from the channel partners. When this resistance evolves into obstructive tactics, the net result is a progressive deterioration in final buyer respect for, and confidence in, the manufacturer and its product. The manufactur­er’s problem is to inspire in its channel partners a feeling of mutual interest and trust and to convince them that it appreciates their contribution to the marketing success of the product. The sales department and the sales force play significant roles in solving such problems.

Any program designed to build or strengthen distributive outlet loy­alty includes two important components. First, there must be appraisals of the manufacturer’s policies and their manner of implementation, with a view to identifying the impacts on channel partners’ attitudes. Second, there must be analysis of the communications system with the distributive network. In other words, most cases of disloyalty have their roots in the manufacturer’s policies, which may be inappropriate or misapplied, or in shortcomings of the communications system.

Appraisal of the manufacturer’s policies and their implementation. The manufacturer needs critical appraisals of the product, the services rendered in connection with it, and the policies and practices followed in its distribution and promotion. The manufacturer must determine the degree to which the product matches the distributive outlets’ merchan­dising requirements and how the product conforms to “their” evaluations of final buyers’ wants. Manufacturer-performed services, such as installa­tion and repair, should be offered in response to the recognized needs of channel partners and final buyers. All the manufacturer’s distribution and promotion policies and practices must be intelligently conceived, fairly applied, and fully understood by the outlets.

The interest of channel partners in improving relations with man­ufacturers varies from product to product. When the product is a mass- distributed convenience good, many manufacturers try to reach the ultimate consumer with similar products. Each competes for the attention of the same dealers, the majority of whom see little reason to favor one supplier at the expense of others—unless a particular supplier proves the

benefits that it claims will accrue to the dealer. Since such products are generally distributed through multiple layers of distributive outlets, condi­tions do not favor the development of close relations with those selling to final buyers. Thus, the manufacturer, who sells through wholesalers, finds it difficult to develop close relations with retailers.

For shopping or specialty goods, some form of exclusive agency or selective distribution is generally used, and the manufacturer sells direct to the retail dealer. Dealers handling these products have as much, or almost as much, interest as the manufacturer in the success of cooperative efforts. Thus, in the consumer-goods field, programs for improving distributive network relations are most appropriate, and stand the greatest chance of success, when the manufacturer markets a specialty or shopping goods through a limited number of outlets.

In the industrial-goods field, most manufacturers distribute their products directly to industrial users. Those who utilize non-direct market­ing channels usually have opportunity to improve, and to benefit from, improving relations with their distributive networks.

Dealers often pursue obstructive tactics because of a manufacturer’s unwise pricing practices. For example, when a manufacturer grants exces­sive discounts for large orders, the product may become a “price football” for large dealers competing on a price basis. This happens after a heavily advertised product becomes well known and is in strong demand. Smaller dealers may not even try to meet their larger competitors’ resale prices. Instead, they promote substitutes for the manufacturer’s brand. The under­lying difficulty here, as in most cases of unwise pricing, is that some deal­ers believe that they are receiving inadequate compensation for handling the product. The price and discount structure should allow dealers, large and small, a reasonable gross margin. The solution to problems arising from unwise pricing practices is often to overhaul policies on marketing channels and distribution intensity. For this reason, an appraisal of pricing should accompany a close examination of distribution policy.

The manufacturer should appraise the impact of its promotional pol­icies on the distributive network. These policies need evaluating to deter­mine how well the manufacturer’s advertising program is coordinated with the sales force’s efforts, for instance, and to assess the effectiveness of coordination of the total promotional program with the network’s efforts. In appraising the manufacturer’s policies, the manner in which each is administered deserves attention. The manufacturer should have sound and appropriate policies, and these should be applied fairly in all relations with dealers. The manufacturer, in other words, should abide by the rules that it itself has set up—it should refrain, for example, from allowing secret price concessions and furnishing special assistance to some dealers and not to others. But even though the manufacturer holds to its policies and refuses to make exceptions, dealer complaints arise. Some are without merit, but each should be acknowledged, investigated, and adjusted before it evolves into permanent resentment.

Favoritism among customers should be avoided, not just disapproved of officially. Sales personnel, and sometimes sales executives, play favorites when the product is in short supply. When final user demand expands more rapidly than the available supply of product, or when total demand is underestimated, salespeople and sales executives are bombarded with entreaties of important customers for increased orders. Those who submit to these pleas, and who thereby neglect smaller accounts, should real­ize that when normal conditions return, customers whose business was ignored are susceptible to competitors’ selling arguments.

In attempting to avoid favoritism, some manufacturers go too far in the opposite direction. During periods of scarcity, they spread available supplies over as many accounts as possible. Unless adequate controls are provided, large customers receive allocations too small to be useful, and small customers more than they have ordered in the past. If this happens, relations with the best accounts, the larger ones, are affected adversely. Again, the likely consequence is a general weakening of the company’s competitive position. Allocation policies should be based on the relative needs of all classes of accounts. Complaints of unfair treatment should be investigated, and inequities should be adjusted. Under conditions of short supply, it is impossible to keep every customer satisfied, but all should be convinced of the fairness of the policies in effect.

Analysis of communications system. Insufficient personal contact between distributive outlets and the manufacturer often contributes to dis­loyalty. When the marketing channel includes several layers of channel part­ners, when personal selling plays an insignificant part in the promotional program, or both, defects in the manufacturer’s communications system with its distributive network are likely. Although its product, distribution, promotion, and pricing policies are sound, a manufacturer’s remoteness, institutionally if not geographically, from outlets and their problems may mean certain policies are inappropriate for them. When competitors have closer relationships through their own salespeople with these outlets, the outlets may regard the manufacturer as too distant to deserve their cooper­ation. They may continue to handle its product, but mainly because of its already established demand. Before the situation can be improved, steps must be taken to improve communications.

Improvements in communications with the distributive network take many forms. Sometimes it is a drastic change in distribution policy, for example, a manufacturer changes the use of wholesalers to direct- to-retailer selling and obtains closer contact with retailers. Or it is backing up wholesalers’ efforts with a force of missionary salespeople. A program of occasional visits to distributive outlets by sales executives improves commu­nications and cements relationships. Similar benefits accrue from company sponsorship of national or regional conventions for distributive outlets. Such inexpensive methods as personal letters, emails, or telephone calls from sales executives, the circulation of specially edited dealer magazines, or advertising to the trade are effective not only in improving communica­tions but in building and retaining dealer loyalty.

Strained relations with distributive outlets result from ineffective han­dling of correspondence. When dealers request information, or when sales personnel relay their queries, responses should be prompt. To procrasti­nate is to irritate the customer and to risk losing goodwill. All messages from customers should be acknowledged, and if answers are not read­ily available, that fact should be communicated. Questions that cannot be answered usually relate to subjects that should command the attention of top-ranking sales executives.

Effective sales executives have many ways to keep track of custom­ers’ attitudes. In well-managed companies, salespeople report important changes that they observe taking place. Internal analysis of sales records detects shifts in the source and size of orders received; often these are symptomatic of changes in customers’ attitudes. Studies by marketing research personnel reveal criticisms of company policies and practices and suggestions for their improvement. Ownership of a few outlets allows the firm to experiment with new merchandising and selling techniques that, if successful, are passed on to customers.

2. Stimulating Channel Partners to Greater Selling Effort

Dealer apathy is common. Some manufacturers invest millions of dollars in promotion, but dealers, outwardly at least, are not only unimpressed but unmoved. Many dealers fail to see why they should tie in with the manufacturer’s promotion or provide extra push for the product. They feel, sometimes rightly, that the manufacturer wants more assistance from them than it is willing to extend—and frequently these feelings trace to inade­quacies in salespeople’s presentations. Under these circumstances, coor­dination of promotional efforts is difficult. The first step in overcoming dealer apathy is to identify the reasons lying behind it. The second step is to take positive action to increase dealer-selling effort.

Changing policies. Inappropriate or outdated sales policies may be the cause of dealer apathy. Alert competitors may have adjusted their policies to the changing situation, while the company, whose dealers are apathetic, may have lagged behind. Management may have clung to policies for senti­mental reasons. Bringing policies into line with marketing conditions stim­ulates dealer effort.

Companies utilizing multiple marketing channels frequently encounter problems in obtaining support from distributive outlets in some channels. One consumer-products company, for instance, sells directly to large retail­ers such as corporate chains and through wholesalers to smaller retailers. Company salespeople are in personal contact with large retailers, and they gain the support of these dealers. But to gain the support of smaller retail­ers, the sales personnel must work through the intervening wholesalers, earning their support as well.

Particular attention should be given to pricing policy. Wholesalers, as well as retailers, expect that margins will be in line with the marketing tasks the manufacturer expects them to perform. But margins need setting, too, with an eye on the margins competing manufacturers offer. If channel partners believe that the manufacturer is asking for too much support and offering too little margins or if competing manufacturers expect less support and/or offer higher margins, the manufacturer’s pricing policy must be brought into line.

Reformulation of other policies stimulates distributive outlets to greater selling effort. Policies on credit extension, service, advertising and selling allowances, and quantity and cash discounts should be scrutinized to determine if they provoke dealer apathy. Policies on marketing channels and distribution intensity sometimes need revising to stimulate the channel partners to greater effort.

A frequent reason for the indifference of channel partners lies in their previous experiences with promotional programs. Wholesalers and retail­ers are offered far more promotions than they can accept. Channel partners accept and push the promotions of those manufacturers with whose pro­motions they have had good experience in the past. If a manufacturer has had successful promotions in the past, then the distributive outlet has more confidence in the manufacturer’s current promotion.

Sharing promotional risks with dealers. On analyzing the attitudes of dealers, the manufacturer sometimes finds that these channel partners are not enthusiastic, because they are risking so little on the promotional pro­gram. Benefiting from the manufacturer’s promotion over a long period, dealers come to depend upon the manufacturer to perform almost the entire selling task. They feel that it is the manufacturer’s job to bring cus­tomers into the store and theirs to ring the cash register and pocket the profits. Other dealers consider it unfair to show enthusiasm for any one promotional program, since so many manufacturers’ products are repre­sented on their shelves.

To combat problems of this sort, manufacturers demonstrate consid­erable ingenuity in devising strategies to stimulate dealers to greater sales effort. In one widely used strategy, the manufacturer attempts to persuade dealers to invest time, effort, and money in promotional programs. Thus, manufacturers who would provide free point-of-purchase display materials to retailers charge for these materials, theorizing that retailers who risk their own funds will make good use of the displays and hence justify their costs. Similarly, manufacturers who inaugurate dealer-cooperative advertis­ing programs in which expenses are shared with dealers commonly expe­rience renewed dealer interest. Whenever dealers have a stake, even a lim­ited one, in the final results of a promotional program, they work towards making it successful.

Using promotional methods. To stimulate channel partners, manufac­turers may use techniques that compel them to provide extra push for the product. These techniques, overcome distributors’ indifference by provid­ing additional incentives. These incentives appeal to the channel partners, their salespeople, or final buyers.

Incentives to the channel partners. Dealers are offered special prices on larger-than-average orders, or bonus offers like 10+1 product. These offers persuade dealers to increase the size of their inventory investments, thus putting them under more pressure to promote the product. Other ways of accomplishing this result include offering premiums to dealers who make purchases above a specified minimum size, or packing premium coupons, redeemable for merchandise of the dealer’s choice, in each ship­ping case. Sometimes the manufacturer awards the premium only after the secondary sales of the product, thus shifting the emphasis from building up the dealer’s inventory to making sales to the final buyer.

Manufacturers sometimes combine dealer incentives with sales vol­ume targets set for individual dealers. If dealers meet or exceed their sales targets within the sales campaign period, they receive prize awards— often in the form of trips for dealers and their spouses to exotic places like Singapore, Bangkok, or Hong Kong. In some instances, dealers are assigned sales volume targets on a month-to-month basis and are awarded prizes monthly. Combining the dealer incentive with a sales volume target often motivates dealer management to strive very hard to achieve manufac­turer set sales volume targets.

Incentives to channel partners’ sales personnel. To stimulate the sales personnel of channel partners, manufacturers use a wide variety of incen­tives. Special incentives and rewards are used extensively. In some fields, as in cosmetics and women’s accessories, the manufacturer pays retailers’ salespersons a small sum (known as a “spiff or “P.M.”) for each unit of the

product they sell. One hosiery manufacturer, for instance, paid retailers’ salesperson 50 cents for each pair of its brand sold. Salespersons, wait­ing upon customers not specifying brand, naturally push the brand on which they receive the P.M. Many retailers dislike P.M.s, however, because they weaken retail management’s control over selling techniques used by salespersons.

One widely used strategy is for the manufacturer to conduct a sales contest for dealers’ or distributors’ sales personnel. The automobile manu­facturers, for instance, conduct incentive programs for their dealers’ sales personnel. Prize awards are incentive trips and “prize-point checks” redeem­able in merchandise. Typically, points are awarded for selling units of par­ticular models and extra points for conversion sales (where a competitive model has been owned by the customer). There are thousands of dealer­ships for each make and tens of thousands of dealer salespersons, so these are large-scale contests. Because of the specialized planning and adminis­tration required, most manufacturers turn the planning and sometimes the administration also, over to firms specializing in sales incentive programs. The planning and administrative services of sales incentive agencies are made available to manufacturers at little or no cost-they make their profits from the markups on merchandise and travel used as contest awards.

Incentives to ultimate consumers. Manufacturers of convenience goods stimulate dealers indirectly by using forcing methods to promote purchases by ultimate consumers. These methods include couponing, sampling, con­sumer contests, premium plans, “cents-off promotions, and special intro­ductory offers. If a promotional method works out as the manufacturer intends, rapid movement of the product helps to overcome dealer lethargy. Numerous administrative details, however, must be handled effectively in successful implementation of these forcing methods. The manufacturer must see that its own sales force exerts the needed effort and obtains the required support from wholesalers and their sales personnel. Companies using numerous programs of this sort generally have a sales promotion manager, who is responsible for both planning and administration.

The manufacturer using a sales promotion must not antagonize or burden its dealers. One survey of supermarket managers revealed that the majority favored discontinuance of cents-off deals by coffee roasters. Too frequent use of these deals caused problems in supermarkets of mixed inventory of coffee containers—some with and some without cents- off offers. Supermarket managers, too, are not generally entranced with coupons giving cents-off allowances to buyers of particular products— redemption of coupons slows down movement at checkout counters and creates extra bookkeeping problems. Continual use of such promotional methods promotes foot-dragging by dealers.

3. Developing Managerial Efficiency in Distributive Organizations

To make its dealers more enthusiastic about its product, the manufac­turer should consider increasing dealer efficiency. The dealer’s primary concern is to make, or better yet, to increase, profits. The manufacturer, who frequently has access to superior managerial know-how, can search out improved methods for its dealers. It is not enough for the manufac­turer to find better operating methods for the dealers to use; the manu­facturer must see that they learn how to incorporate these methods into their operations. The manufacturer recognizes that an important key to success lies in how dealers operate their businesses. More efficient dealers move the manufacturer’s products more rapidly through the marketing channel and produce larger sales and profits both for themselves and for the manufacturer.

Dealer-training programs. Not all manufacturers benefit from provid­ing dealer managerial training programs; payoff from these programs var­ies with the product. Management training programs for dealers are most beneficial when the products require considerable personal-selling effort. Such programs are less beneficial where final buyers buy as a matter of habit or on impulse. Dealer training programs are necessary when the product’s unit price is high, trade-ins are common, the final buyer’s pur­chase decision is postponable, the product requires demonstrations and dealers’ recommendations play a significant role in making sales.

Assistance in sales force management. To develop managerial effi­ciency in distributive organizations, the sales executive’s role often is to improve dealer sales force management. Dealers are advised on sources and methods of recruiting new sales personnel, sales compensation plans, and supervision, and control of sales personnel. Sometimes, dealers are provided with exhaustive “audits” of their entire personal-selling pro­grams, together with recommendations for improvements. Many manu­facturers, particularly those marketing industrial items and big-ticket con­sumer durables, provide sales training assistance to dealers. Sometimes this may be nothing more than manufacturer-prepared sales training material, including films and slide presentations. More often, the manu­facturer’s sales force, specialized training personnel, or sales executives conduct or participate in dealers’ sales training programs. The manufac­turer’s main aim in assisting dealers with sales training is to make certain that dealers’ sales personnel know the product’s “unique selling points” and how best to present them. Other objectives include improvement of sales techniques used by dealer sales personnel, more effective prospect­ing, spreading the word-on-product uses and applications, and explaining cooperative advertising programs in terms of the roles of dealer sales personnel.

Dealer sales training programs should not be standardized through­out the entire market. Subjects included should vary and receive differ­ent degrees of emphasis depending upon problems confronting dealers in each area. With each clinic focusing on local problems, participants show greater receptiveness, and there is strong and immediate impact on sales of the manufacturer’s product. Consequently, prior to planning a dealer sales clinic, the manufacturer’s sales force should report fully on dealers’ problems territory by territory.

Training of dealers’ sales personnel generally is decentralized. Unless the manufacturer uses selective or exclusive agency distribution, dealers are reluctant to have their salespeople attend training sessions at the fac­tory. However, if the product is an industrial good of high unit value, about which dealers’ salespersons need considerable technical information, fac­tory training schools are appropriate. When training is at the factory, the cost to the manufacturer is high, because usually the only costs borne by dealers are trainees’ travel charges. Dealers object to having their sales forces away from their territories, and, if the trainees are paid partially or wholly on a commission basis, they dislike the financial sacrifice. For these reasons, as well as the fact that orientation to local problems is desirable, most training of dealer’s sales personnel is decentralized; it may be con­ducted on the dealer’s premises or, especially when each dealer has only a few salespeople, at hotel meeting rooms, convention halls, nearby resorts, or the manufacturer’s branch sales offices.

Advice and assistance on general management problems. Another approach to improving efficiency of distributive outlets is to provide advice and assistance on general management problems. Dealers are counseled on store location, store layout, arrangement of fixtures and stock, account­ing methods and systems, control of inventories and costs, advertising, credit and col- lection policies, and other matters. The manufacturer fur­nishing management advice usually expects the dealer to pay only for the actual cost of the service given, if at all. In some instances, the manufac­turer regards the dealer advisory service as part of its own sales promo­tional program and absorbs the entire cost. One construction products manufacturer, for example, has its marketing research department predict its dealers’ sales from the construction permits issued in each area and passes this information along to dealers for use in their business planning.

Many dealers do not manage their businesses soundly. They fail to reach sales volume and profit goals, even when the manufacturer provides them with well-planned promotion and selling support. Failures adversely affect the morale of both the manufacturer’s sales force and the dealers. To avoid dealer failures, some manufacturers have programs for the evalu­ation and analysis of dealers and dealer selection processes. This pays off in reduced dealer turnover, dealer growth in profitability, and increases in sales of the company’s products.

Shelf-allocation programs. Manufacturers of items sold through self-service retail outlets have a special interest in securing shelf space for their brands. One cereal company has a “shelf-allocation program,” which purports to outline for retailers an ideal shelf-space arrangement for its entire breakfast cereal sections. Several large grocery manufacturers provide retailers with pamphlets describing inventory control and shelf- space allocation procedures for each grocery department. Nabisco per­forms shelf-allocation analysis for retailers on cracker and cookie displays, and its competitors offer comparable services.

A manufacturer’s interest in receiving a reasonable share of available shelf space stems from a desire to minimize stock-outs and to attract more impulse buyers. Some retailers over allocate shelf space to private labels and slow-selling items, putting the space squeeze on faster-selling, nation­ally advertised brands. Other shelf-space inequities develop because retail­ers stock excessive numbers of duplicate brands. Other inequities develop because of the effect of store manager-competitor sales force relations. A logical and “fair and unbiased” shelf-allocation program, intelligently mer­chandised to the dealers, can help assure reasonable space for the manu­facturer’s product on retail shelves. ‘The manufacturer’s sales force plays a key role in implementing shelf-allocation programs, especially in lining up the cooperation of store managers.

Missionary sales personnel. Another approach aimed toward making channel partners more efficient is to use missionary salespeople. In market­ing consumer products, for instance, missionary salespeople work closely with wholesalers’ personnel and make calls upon wholesalers’ custom­ers and prospects—the retailers. The missionaries check each wholesaler’s inventory, make suggestions for increasing the effectiveness of wholesaler sales personnel, and assist in their training; they acquaint wholesalers with the manufacturer’s advertising program and generally maintain close and friendly relations. In addition, they call on retailers in an effort to improve movement of the product at the retail level. Orders they obtain from retail­ers are turned over to the wholesalers for filling. In the drug and certain other fields, missionary salespersons are known as “detailers,” and they also make calls on persons who influence, but do not make, purchase decisions, such as doctors, dentists, hospital administrators, and school board members.

In marketing industrial goods, missionaries perform similar functions, but generally they give more emphasis to training distributors’ and dealers’ sales personnel on product characteristics, new applications, and sales fun­damentals. In selling highly technical products with numerous specialized applications, they assist in analyzing customers’ problems and consummat­ing sales. In industries served by outside professionals, such as in building and construction, missionary salespeople acquaint engineers, architects, and other professionals with the technical characteristics and applications of the manufacturer’s product.

Missionary salespeople provide services designed to improve rela­tions with the distributive network. They perform an educational function as they acquaint distributive outlets and their personnel with new products and applications, while they keep alive the trade’s interest in established products. Their effort supplements those of the distributive outlets’ selling forces in translating this knowledge into greater sales volume. The role of missionary salespersons is particularly critical when they call on persons influencing but not making buying decisions, or when the consummation of sales demands greater product knowledge than the middlemen’s sales force possesses.

Generally, missionary salespeople should not permanently assume functions that belong to the dealer. A manufacturer sets up a missionary sales force because its middlemen are not performing as it desires. The manufacturer attempts to obtain quick improvement by substituting direct action for the much slower, indirect effort to upgrade the overall manage­ment efficiency of distributive outlets. The outlets should understand that the missionary sales force is only a temporary way to fill the gap between the outlet’s present capabilities and the manufacturer’s expectations. However, some channel partners are constrained from attaining desired performance levels. An outlet stocking competing brands may be unwilling to promote one at the expense of the others, and a permanent mission­ary sales force is necessary to achieve satisfactory promotion. The manu­facturer providing permanent missionary sales help should guard against continually increasing its range and allowing channel partners to pass on the blame for their own inefficiency. The manufacturer should, with rare exceptions, expect its dealers eventually to resume functions performed by the missionary sales force. The more effective missionary salespeople are as developers of managerial and selling skills, the sooner they can be reassigned to other duties.

4. Identifying Source of Supply of Final Buyer Level

Many manufacturers make special efforts to ensure that final buyers can find the local outlets that handle their product and that, once in the right outlet, these buyers can locate the product with minimum difficulty. The significance of this problem differs with the product, the manufacturer’s policy on distribution intensity, and the distributive outlets’ operating characteristics. Consumer-goods manufacturers, owing to the greater length and complexity of their marketing channels, generally have greater problems in this area than do industrial-goods producers.

For the manufacturer, distributing its product through a limited num­ber of dealers and/or distributors, publicizing the identity of outlets stock­ing the product is essential. Thus, for consumer products manufacturers using selective or exclusive agency distribution, the identification of local retail outlets is an important objective. These manufacturers generally also invest heavily in consumer advertising. But it does little good to presell through advertising unless consumers can find the product. The consumer is not often predisposed to spend a great amount of searching time in find­ing a store that stocks a particular item. If the manufacturer is to capitalize on the preconditioning of consumers through advertising, steps must be taken to assure that consumers can identify the proper retailers.

Local advertising. Manufacturers of consumer specialty and shopping goods achieve identification of their local outlets in different ways. Some buy space and time in local media and advertise over the names of local stores, occasionally with the stores paying part of the cost. Others list their dealers in national advertisements. Many list their dealers on their web­sites, and some provide their retailers with appropriate store signs. Others persuade their retailers to feature the manufacturer’s product in their own local advertising and make available ready-made advertising layouts or matrices.

Local advertising of the manufacturer’s product, whether paid for by the manufacturer or retailer or jointly, not only adds local flavor to a pro­motional program but may increase its effectiveness. In individual market areas, dealers frequently know better than the manufacturer which types of advertising are the most effective. Because of regional variances, many manufacturers use prices only in local advertisements. The manufacturer desiring to advertise its produces price locally may use the same advertis­ing to identify its local dealers.

Point-of-purchase identification. Although the manufacturer of a consumer convenience good rarely attempts to identify all its dealers, it often takes steps to emphasize the in-store presence of its product. When the item is one that customers buy on impulse, the manufacturer’s sales force secures point-of-purchase promotion. The only place in the entire marketing channel where the product and the ultimate consumer actu­ally come into contact is in the retail outlet—at the point of purchase. The manufacturer has the best opportunity to make the “payoff” sale if the product is where consumers can find it. Counter and floor merchan­disers, shelf makers, pre- prints and reprints of national advertisements, mass interior displays (often erected by the manufacturer’s salespeople), special display cases, and display cards, to mention only a few of the many sales promotion pieces, are all used to identify the product inside the retail store. Where the manufacturer’s sales personnel call upon the deal­ers frequently, it is common for them to receive preferred shelf or counter positions for the product display. Self-service point-of-purchase pieces and preferred display positions (tied in with good packaging) are the only ways in which the manufacturer can influence consumer buying behavior in the store. Point-of-purchase materials take the place of clerks in providing information to prospective buyers and even in persuading them to buy. As self-service spreads to stores retailing specialty and shopping goods, point- of-purchase materials become even more important.

Careful attention should be given to the distribution of point-of- purchase display materials, and special precautions can assure their use by retailers. The most effective distribution method is to have the sales force (or a specialized display service company) both deliver and set up the dis­plays in retail stores. When display pieces are distributed in shipping con­tainers with the product, many, if not most, retailers discard them. To avoid the waste of display pieces, some manufacturers obtain distribution by publicizing their availability through direct-mail or trade-paper advertising; however, unless the display piece is most unusual, few dealers write in, or even ask salespersons for it. This seeming lack of interest by retailers does not necessarily reflect disapproval of these promotional devices—more often it reflects lack of understanding or inspiration in their use, inability to cope with the volume of materials received, or inertia.

To maximize use of display pieces by the retailer, they are designed with retailers’ problems in mind. A display piece should not be too com­plicated for the average retail employee to assemble, neither should it be too large nor too small for the space in which it will be erected in retail stores. The design should make it clear that the display piece will help retailers to make more sales. In gathering information for design purposes, the knowledge of retailers’ problems and operating circumstances of the manufacturers’ salespeople should be fully utilized.

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.

One thought on “Objectives and Methods of Manufacturer-Channel Partners’ Cooperation

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