After designing the marketing channel, company can select the channel partners that meet its requirements. Some factors for selecting channel partners are sales potential, product portfolio, industry experience, financial strength, market reputation, location, and the size of the channel member.
Sales Potential. Sales potential of the channel member is a major factor in selecting channel partner. It’s important to gauge the channel member’s ability to sell the company’s products in the designated sales territory. Companies consider the factors like the number of channel partner’s sales people, number outlets covered, number of delivery vehicles, delivery schedules, and the current sales turnover.
Product Portfolio. Product portfolio constitutes the type of products sold by the channel member. For example, a company selling products in a shaving range may prefer to appoint a channel partner on the basis of the complementary product portfolio. Sales managers of many electronics companies also consider the channel member’s ability and expertise to handle products effectively. Sales managers of automobile companies also look into the delivery of after-sales services before selecting a channel partner.
Industry Experience. The channel member’s industry experience is also a critical factor in selection. Many sales managers look into the channel member’s past experience in selling a particular product range. The company can look into factors like the type of products and the customers handled in the past. Channel members with good experience can be of great help for the new companies as they can help the company in designing the distribution strategies and sales promotion activities.
Financial strength. The financial strength of the channel member is directly related to availability of the requisite inventory in the market and the number of outlets covered by the channel member. Usually, retailers are slow in giving the payments so it is important for the channel members like distributors / wholesalers to have sufficient financial capabilities to not only maintain the adequate level of inventory but also to make the payment to the company in the stipulated time. Channel member with good financial strength will also help to increase the expansion plans of the organization.
Location. Location of the channel member can play a vital role in the easy availability of the products for the retailers. In many industries like pharmaceuticals, wholesaling channel members are concentrated in geographic pockets dedicated to pharmaceutical products. This makes it easy for the pharmacy retailers to come to that particular area to buy the products of different companies.
Size of the channel member. Many companies consider size of the channel member and the presence of the competitive range of products while selecting the channel partner. A well-established channel member can offer good market coverage and financial support but may not give the desired focus. On the other hand, a small distributor with less number of companies may not have large market coverage but can provide the required focus. Many companies do not prefer to appoint channel members having competitive range of products because of conflicting interests.
Apart from the above factors, companies also consider the factors like market reputation, trade policies, pricing strategies, and future potential in evaluating the channel members.
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.