Directorate of distance education

 
to respond 
to customers’ purchasing patterns, thereby ensuring the right products 
are delivered
 
to store shelves on time.
Franchising Systems
In a franchise system a seller (the franchisor) gives an intermediary 
(the franchisee) specific services (such as marketing support) and rights to 
market the seller’s product or service within an agreed territory. In return, 
the franchisee agrees to follow certain procedures and not to buy from 
unauthorised sellers. 
The franchisor also typically offers assistance in management 
and staff training, merchandising and operating systems. This support 
is usually provided in exchange for a specified fee or royalties on sales 
from the franchisee. Examples of businesses which are predominantly 
franchised include McDonald’s, Body Shop, Benetton etc.
Motivating Channel Members
Constant training, supervision & encouragement. Producers can 
draw on the following types of power to elicit cooperation:

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Notes
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➢
Coercive power
. Manufacturer threatens to withdraw a resource 
or terminate a relationship if intermediaries fail to cooperate. 
Produces resentment.
➢
Reward power
. Manufacturer offers intermediaries extra benefits 
for performing specific acts.
➢
Legitimate power
. Manufacturer requests a behavior that is 
warranted by the contract.
➢
Expert power
. Manufacturer has special knowledge that the 
intermediaries value.
➢
Referent power
. Intermediaries are proud to be identified with the 
manufacturer.
➢ A customer asks a retailer, who stocks your pen, for another brand 
called ‘Bad Pens’. The retailer recommends and offers your pen as 
superior. 
➢ A retailer actively solicits business for you by asking customers 
buying other products to come and have a look at the exquisite 
‘Grand Pen’. 
➢ This retailer is obviously very motivated. ‘Mindshare’, as it is 
called in the USA, has to do with how important your product 
is in the distributor’s mind relative to the other lines they carry. 
Winning the battle for the distributor’s share of mind can be more 
important than many other marketing strategies. It applies in 
industrial markets and consumer markets where intermediaries 
play important roles in the distribution channel. 
➢ In reality, maintaining continually high levels of motivation among 
intermediaries presents a challenge. It requires a reasonable quality 
product, creative promotions, product training, joint visits between 
producer and distributor, co-operative advertising, merchandising 
and display. 
➢ Most of these apply to agents as much as distributors and retailers. 
➢
Keeping the intermediary stimulated is important. Positive 
motivators, like sales contests are preferred to negative motivators 
like sanctions such as reduced discounts and the threat of 
terminating the relationship. 

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Notes
82
➢ A positive reward works better than a negative punishment. Ideally 
there should be a shared sense of responsibility - a partnership - a 
strategic partnership. The supplier and intermediary are there to 
help each other. Vertical Marketing Systems are a good example. 
➢ Clear communications, covering sales goals, review meetings, re-
porting procedures, marketing strategy, training, market infor-
mation required, suggestions for improvements, all help. Regular 
contact through visits, review meetings, dinners, competitions, 
newsletters, thank you letters, congratulatory awards all help to 
keep everyone working closely together. 
➢ These are all non-financial incentives which provide a form of 
psychic income as opposed to financial income. That’s not to say 
that financial incentives aren’t useful motivators, it just means that 
there are other motivations there too. In fact the money spent on 
financial incentives is often spent more effectively when the sales 
person is rewarded with a plaque, a gold pen or a holiday in the 
Bahamas rather than just the cash which tends to get soaked up and 
lost in a sea of ordinary household daily expenditure. 
➢ Non cash rewards appeal to the higher levels of Maslow’s Hierarchy 
of Needs - belonging, esteem and self actualization. 
➢ Despite this, conflict can occur when too many distributors are 
appointed within close proximity of each other, or the producer 
engages in a multiple channel strategy of direct marketing as well 
as marketing through intermediaries. 
➢ Carefully motivating distributors is vital if goods are to flow 
smoothly through the channel and reach satisfied customers.