Developing the channel design, recruiting a host of dealers and inducting them into the company are not everyday tasks in channel management. It is the administration and management of the dealer network that constitutes the everyday task here. We shall examine this task in detail.
Component tasks in managing the dealers:
The task of managing a dealer network has several components as given below:
Determining the trade relations mix:
Evidently, developing the trade relations mix is the first task in dealer management. As shown in Chart below, the trade relations mix or relations between a firm (principal) and its dealers revolve largely around the following four factors:
1. Territory of operation.
2. Trade margin.
3. Functions which the dealers have to Perform
4. Functions which the firm has to perform.
Territory of operation:
The firm must the issue of dealersâ€™ territory in a fair manner. Territory has significance at wholesale as well as retail levels. Different businesses have different requirements and different practices in this regard. FMCG businesses, for example, supply their products to practically all retail outlets; they do not assign any territory as such to any retailer; they assign territories only to distributors, redistribution stockists and C&F agents. Durables marketers on the contrary, operate through a limited number of dealers in each town. Usually, in these lines, territories are assigned to the dealers; even where territories are not exclusively assigned, an understanding is often worked out.
Component Tasks in managing the Dealer Network
1. Fixing the trade relation mix
2. Territory of operation.
3. Trade margin
4. Functions which the dealers have to perform
5. Functions which the firm has to perform
6. Servicing the dealer
7. Securing shelf space and merchandising support from dealers
8. Dealer motivation.
9. Performance appraisal of dealers.
10. Dealer training and development.
11. Resolving channel conflicts.
In some cases, manufacturers supply their products directly to certain specialized channels/select consumers bypassing the appointed wholesale functionaries in the territory. Such buyers usually prefer, as a matter of policy, to deal with the principal rather than the wholesaler of the area. The wholesaler of the area often expects some compensation for such sales that take place in his territory.â€™ The manufacturers some times cover the wholesalers with an overriding commission for such sales. At other times, they do not provide any compensation whatsoever. The important point is that the firm must have settled in advance the policy in this regard with their wholesalers. The agreement between the firm and the wholesaler must specify whether and to what extent the wholesaler will be covered on such sales.