Good management is all about anticipating events and planning for action before the events happen. This is where understanding the sorts of risks which are likely to arise is very important. The risks may be of one or more of the following types:
- The usual product risks, political risks, economic risks, etc. that exist in any international marketing operation – these are not being explored here.
- A chosen channel member may turn out to be a misfit. This is where careful planning and selection of the right partners is vital. A good channel member of yesterday may not be a good channel member tomorrow. A mutual understanding of the roles of the channel members and their responsibilities to each other is a must.
- At least one channel member is not pulling their weight. The performance expectations must be made clear right from the start. Mutual monitoring of performance is vital to the continuing success of the ‘venture’. Mutual reliance must be recognized. All campaign planning must be undertaken jointly so that no motivation is lost due to inadequate planning.
- Breakdown of the ‘relationship’ – where independent members form a significant part of the channel, the relationships are based on individuals, their interpersonal behaviour, trust, mutual understanding of a set of common objectives and other objectives based on the needs of the parties concerned. ‘Mutuality’ of interest must be maintained to avoid the risk of damaging the position of the two parties.
In all these cases, rapid contingency planning is crucial to safeguard the company’s position.
Elements of Dealer Motivation
- The trade margin
- Special incentives
- Harmonious relations
- Effective communication
Dealer Motivation: The firm should constantly motivate its dealers lists the elements of dealer motivation.
Trade Margin, a Major Motivator
An attractive trade margin is no doubt a key element in dealer motivation. After all, the primary objective of any dealer is to earn an attractive return on his investment. We have discussed the issue of trade margin in detail in the earlier paragraphs.
Motivational Elements Other than Trade Margin Trade margin though important, is not everything in dealer motivation. The firm can use several other elements in enthusing its dealers.
Dealer Incentives
Besides an attractive trade margin, the firm should provide some special incentives to the dealer so as to win him over and sustain his loyalty to the firm/brand. Sustaining dealer loyalty is the sure route for obtaining optimal retail thrust for the product/brand. Special incentives like quantity rebates, off- season rebates, gifts, cash incentives, etc., can be used for motivating dealers.
With increased competition, companies are now increasingly realizing the role of such incentives. One measure that seems to be catching the fancy of companies is fully-paid vacations for dealers. Companies are also hosting lavish dealer meets at exotic places. For instance, ITC has been taking out whole groups of its dealers on a safari to Kenya. Godrej-GE last year flew over 40 of its best dealers to the US and Videocon sent around 650 of its best dealers to Europe. Even companies, which were giving cash or gold sovereigns as incentives earlier, now seem to have realized the potential of travel abroad as an incentive. The tours are considerably expensive, since the companies try to ensure that they become unforgettable outings for the dealers. The companies concerned seem to spend on an average more than Rs 40,000 per head on dealer holidays. Godrej-GE, which is one of the big spenders on dealer incentive tours, has an annual budget of around Rs 4 crore for this purpose. As the demand for such tours has been going up, some travel houses have started special divisions for corporate dealer incentive tours
Harmonious Relations and Cooperative Endeavor
Harmonious dealer relations are another important element in dealer motivation. Frequent visits to dealers’ shops by the field sales force of the company/stockiest helps harmonious dealer relations
Dealer meets too facilitate this process. They help to exchange ideas and to generally bring the dealers closer to the company; Dealers need understanding and support. They are happy to receive sales ideas from the salesmen and executives of the firm. Likewise, helpful and prompt attention to dealer complaints
Associating the dealers in various campaigns such as service campaign, promotion-campaign, etc., will cement relations with the dealers. It will also add to the success of the campaign. The firm can even persuade dealers to share the expenditure on service, publicity and sales promotion. Dealer cooperated service and publicity campaigns not only reduce the financial strain of the firm, but are also more effective than stand alone campaigns by the firm. The willing involvement of the dealers in the campaigns does the trick.
| Ford ‘Dealer wanted’ Ad | |
| ü Market share ü Sales intensity ü Storage space provided ü Inventory holding support ü Standard of service provided to customers ü Enlistment of new accounts | ü Market intelligence support ü Promotional support ü Prompt payment of invoices ü Maintenance of business records ü Submission of reports ü Public relations |
Effective Communication
“Maintaining effective communication with the dealers is another element of dealer motivation. It is, in fact, a part of maintaining harmonious relations. Effective communication often gives a sense of participation to the dealers. Company newsletters and direct mailing can be used for effective communication with the dealers. Periodical dealer meetings/ conventions also help build good communication. They help the firm understand the views of the dealers. In addition, they act as a morale booster.
