Directorate of distance education

Lesson 1.3 - Channel Members
Learning Objectives
After reading this lesson you will be able to 
➢ Identify and understand how to elect channel members
➢ Examine channel structure
➢ Understand various membership issues
➢ Understand how to the channel design takes place
➢ Understand Managing Channel Design decisions
Electing Members Within a Channel 
Having decided to go through intermediaries the next question 
is whether to use agents or distributors and also how many. Unlike 
distributors, agents don’t hold stocks - they only act as sales agents finding 
customers, collecting orders and passing them on to the supplier in return 
for a percentage commission. 
Selection of a Distributor or an Agent an Assessment
1. Market Coverage, 
2. Sales Forecast, 
3. Cost, 
4. Other Resources, 
5. Profitability, 
6. Control, 
7. Motivation, 
8. Reputation, 
9. Competition, 
10. Contracts 

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Notes
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1. Market Coverage: - does the profile of existing customers match 
your target market profile? - is the number of customers big 
enough to meet the required distribution penetration? - is the 
existing sales force big enough to cover the territory? - are they 
dependant on a single individual? - are the existing delivery fleet 
and warehouse facilities adequate? 
2. Sales Forecast: How many can they sell? What are their forecasts 
based upon? Do they give a ‘best, worst and average’ forecast? Will 
they invest in large stock commitment? Do they have budgets to 
run promotions? Some suppliers even ask their distributors for a 
marketing plan showing how they intend to market the supplier’s 
products. 
3. Cost: What will it cost in terms of discounts, commissions, stock 
investment and marketing support? 
4. Other Resources: Does the target market require anything special 
such as technical advice, installation, quick deliveries, instant 
availability? If so can the distributor provide it? 
5. Profitability: How much profit will the distributor generate for the 
supplier? 
6. Control: Do they have a reporting system in place? How do they 
deal with problems? How often are review meetings scheduled? 
Can you influence the way they present your products? 
7. Motivation: Does the agent or distributor convey a sense of 
excitement and enthusiasm about the product? What about its 
sales force - what’s their reaction? 
8. Reputation: Has it got a good track record? This includes the 
number of years in business, growth and profit record, solvency, 
general stability and overall reliability. Is it dependant on one key 
player? 
9. Competition: Do they distribute any competitor’s products? 
10. Contracts: Some distributors demand exclusivity. Some agreements 
tie the supplier in for certain periods of time. Check for flexibility 
in case things go wrong. 

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Notes
37
The bottom line is: Can the agent or distributor be motivated, 
controlled and trusted? Motivated to sell your product among a range 
of others. Controlled to feed back results or change strategy if requested. 
And trusted to act as a reliable ambassador of your product?