This document discusses evaluating channel member performance. It covers the importance of evaluating channel members, factors that determine evaluation frequency such as degree of manufacturer control and member importance. It also discusses developing criteria for performance audits, including sales performance, inventory levels, selling capabilities, attitudes, and competition. General criteria include expectations and objectives, while specific criteria are related to project goals. Determining proper criteria requires understanding auditing standards and the audited organization.

1. EVALUATING
CHANNEL MEMBER
PERFORMANCE
PRESENTED BY
SOUGATA SARKAR
SIDDHARTHA DAS
DAVID SEHLAMGOU THANGEW
PRATIK PURKHAYASTRA

2. DISTRIBUTION CHANNEL
 A distribution channel or a marketing channel is a chain of businesses or
intermediaries through which a good or service passes until it reaches the
final buyer or the end consumer.
 Distribution channels can include wholesalers, retailers, distributors, and
even the Internet.

3. SCOPE & FREQUENCY
OF CHANNEL MEMBER EVALUATIONS
The importance of channel member performance evaluation equals
that of employee evaluations within the firm.
1. Degree of the manufacturer’s control over channel members
2. Relative importance of channel members
3. Nature of the product
4. Number of channel members

4. DEGREE OF CONTROL
Control that a producer,
manufacturer, or franchisor has
over members is based on
strong contractual agreements
Manufacturer lacks
strong market acceptance
for its products & strong
channel control based on
contractual commitments
Channel manager
can demand a great deal of
information on member
operations
Manufacturer
can exert little control
over channel members

5. IMPORTANCE OF CHANNEL MEMBER EVALUATION
1. More substantially use of intermediaries – greater need for evaluation
because the firm’s success is directly dependent on it.
2. The more complex the product – the broader the scope of evaluation
because the process is more complicated.
3. Higher unit value products – the greater the importance of evaluation
because the impact of a single order is important to the manufacturer.
4. The more exclusive the distribution strategy – the greater the need for
comprehensive evaluation.

6. DISCUSSION QUESTION #5
Holiday Inn, a division of Inter Continental Hotels Group PLC, recently terminated 700
Holiday Inn franchise channel members. According to Holiday Inn, these channel members
failed to meet Holiday Inn’s minimum standards. Over the years, the channel members did
not make regular renovations and they were not willing to make the necessary investments
in upgrades, such as new bedding, bathroom fixtures and other improvements, that would
help to position Holiday Inn as a more upscale chain of hotels. Many of the channel
members felt blindsided by what they saw as the franchisor’s stringent requirements and
rigorous enforcement. Some of the franchisees had been associated with Holiday Inn for
decades and felt that they had been loyal and productive channel members. They
questioned the fairness of Holiday Inn’s negative evaluation of their performance.
Do you think Holiday Inn’s termination of so many channel members was “fair”? Discuss
from the point of view of the franchisor (Holiday Inn) and the franchisees (channel
members).

7. EVALAUTION VERSUS MONITORING
Performance
Evaluation
Day-to-Day
Monitoring
Overall performance
reviews that give
management a complete
& objective analysis of
each distributor’s
operations
Overall performance
reviews that give
management a complete
& objective analysis of
each distributor’s
operations

8. PERFORMANCE AUDIT
Three Phases:
1. Developing criteria for measuring channel
member performance
2. Periodically evaluating the channel members’
performance against the criteria
3. Recommending corrective actions to reduce the number of inadequate
performances

9. KEY CRITERIA FOR PERFORMANCE AUDIT:
SALES PERFORMANCE
Comparisons of the channel
member’s current sales to
historical sales
Cross comparisons of a member’s
sales with those of other
members
Comparisons of the channel
member’s sales with
predetermined quotas

10. KEY CRITERIA FOR PERFORMANCE
AUDIT
1. Total level of channel member’s inventory
2. Shelf or floor space devoted to inventory
3. Shelf or floor space provided relative to competitors’
inventory
4. Breakdown by particular products in units & dollars
5. Comparison of figures with channel members’ estimated
purchases of related & competitive lines
6. Condition of inventory & inventory facilities
7. Amount of old stock on hand & efforts made to move it
8. Adequacy of channel member’s inventory control &
record-keeping system

11. KEY CRITERIA FOR PERFORMANCE
AUDIT: SELLING CAPABILITIES
Manufacturer who obtains sales records for channel
members’ salespeople should examine the following
factors:
1. Number of salespeople the channel member
assigns to manufacturer’s product line.
2. Technical knowledge and competence of channel
member’s salespeople
3. Salesperson interest in manufacturer’s products.

12. KEY CRITERIA FOR PERFORMANCE AUDIT:
ATTITUDES OF CHANNEL MEMBERS
Not usually evaluated unless sales performance is
unsatisfactory.
Negative ones often addressed after they have
contributed to poor performance.
Should be evaluated independently of sales data.

13. KEY CRITERIA FOR PERFORMANCE AUDIT
COMPETITION
Channel manager should consider two types of
competition:
1. Competition from other intermediaries.
2. Competition from other product lines carried by the
manufacturer’s own channel members.

14. DIFFERENT CRITERIA IN
PERFORMANCE AUDITING

15. • A) General Criteria
• B) Specific Criteria
CRITERIAS

16. • A) General Criteria: General Criteria are about expression and general
explanation of reliable and accepted performances. General criteria
are usually derived from common sense and proper judgment.
Auditors should be aware and familiarize themselves to general
methods accepted by management in different subject areas. These
methods could be used as general audit criteria for an auditing
mission. According to accepted state standards that are compiled by
the U.S. Government Accountability Office some examples of these
criteria stated for the public sector are as follows:

17. • Expectations or stipulated objectives by the rules and
regulations set by the management
• Technical standards and norms
• Performance of previous years
• Comments of experts
• Performance of other similar economic units
• Performance in the private sector.

18. • B) Specific Criteria: Specific criteria are closely related
to rules, goals, programs, controls, and systems of the
unit under auditing. Specific criteria are usually
inferred from determined goals of a project or specific
program and its standards and specific methods. In
this area, auditors face with serious problems and
these goals usually do not have any measurable
criteria and hence, seriously challenging auditors.

19. DETERMINING CRITERIA
• Audit criteria should be compiled totally reasonable and purposeful
which requires observing logic and proper wisdom. First of all,
auditors should have these qualifications:
• Have a general understanding of auditing and be familiar with related
rules and documents , like the latest studies and audits which have
been carried out;
• Have an enough knowledge about justified reasons and the principle
rules of the main subject or state project which is audited and
qualified by the government or legislator;

20. • Have a good and reasonable knowledge and
understanding about expectations of main
shareholders and also be aware of the main expertise
of the organization;
• Have a general knowledge and practical experience
about other similar state activities or projects.
Besides mentioned qualifications, the collaboration of
the management team of audited unit with auditor’s
team in determining criteria is helpful and could be
helpful in expansion of suitable criteria
DETERMINING CRITERIA

21. CONCLUSION
• Performance auditing and its related services are tools that
developed with the objective of helping managers to guide and lead
their organizations, in order to assess the economy, efficiency, and
effectiveness of the economic unit and provides practical suggestions
for managers to help running their units and includes quality
assessment of the means at managers disposal.
• Regarding the specific features of performance auditing, including
challenging nature of auditing objectives and due to the key role of
the criteria in performance auditing, audit criteria should be chosen
in a way that guaranties the quality, independence and neutrality of
the reports.