Comprehensive channel performance measurement requires assessment of not only financial results. Financial results are primarily oriented toward past performance, although discussed previously insight can be gained into areas of needed improvement. It is equally important to assess channel members satisfaction with service performance of their channel partners. Channel members who are satisfied with their channel partners are likely to maintain the distribution relationship and cooperate in the marketing and distribution strategies of those partners. Dissatisfied channel members are more likely to terminate their participation in a distribution channel, or at least they are more likely to devote less effort and cooperation it the strategies of those who cause their dissatisfaction.
A recent study of wholesalers and retailers in the food industry supports the notion that satisfaction with suppliers’ service performance is a critical factor in channel relationship. Suppliers that have well established brand franchises among final consumers are not likely to be dropped by wholesalers or retailers. However, of the suppliers product line has marginal financial performance, dissatisfaction with distribution service may be the final determinant in the decision to eliminate that supplier.
Even suppliers of products whose financial performance is strong must be concerned with channel members’ satisfaction. In the study cited above, many wholesalers and retailers indicated that they are more likely to participate in the promotional efforts of manufactures whose service performance is satisfactory or excellent. They are also much likely to advertise and feature those suppliers’ product lines and you give preferred shelf space to those manufacturers.
Clearly then customers satisfaction is a critical factor in channel performance measurement. Suppliers must understand channel customers satisfaction to ensure continued proper functioning of the system. Likewise the process of satisfaction assessment provides insight into how channel members evaluate the performance of their partners. Channel members must be satisfied with financial performance, including sales volume, profitability and ROI.
Satisfaction and Service Quality:
Customer satisfaction is a fundamental in marketing, since marketing strategy is built on the foundation of satisfying the customers’ needs and wants. Surprisingly however, the definition and measurement of satisfaction has been a subject of considerable debate in marketing literature.
Originally, satisfaction was defined simply as an attitude. It was though that a simple, overall measurement of satisfaction would be sufficient. However, the way in which customers from their judgment of satisfaction is now most widely explained by the ‘expectancy/disconfirmation’ process. Simply stated, if a customer’s expectations regarding a supplier’s performance are met or exceeded, the customer is satisfied. If perceived performance fall short of expectations dissatisfaction results.
If perceived performance is equal to or greater than expectations, the customer is satisfied.
If perceived performance is less than expectations, the customer is dissatisfied.
For example, if a wholesaler expects delivery from a supplier within two days but the actual delivery takes three days, the wholesaler is likely to be dissatisfied with that supplier’s performance. Interestingly enough, in this example, delivery in one day (which normally would be considered as exceeding the customer’s expectation) might also cause dissatisfaction because the wholesaler might not be prepared to accept delivery at that time.
Given this example, it is clear that understanding the exact nature of customers’ expectations is a critical step in the assessment of satisfaction. In fact, there are at least three types of expectations that a customer might have about a supplier’s performance.
The first type of expectation concerns what the customer believes actually will occur. For example, based on a supplier’s past performance a supplier’s promise of performance, or word of mouth, a customer may believe that the supplier will deliver the product in two ways.
Another type of expectations is the customer’s belief about what the supplier should be able to provide. For example, even in the absence of any information about performance, a customer may believe and therefore expect that a supplier should be able to provide two day delivery service.
A third type of performance expectation that customers have is a minimum standard of performance that must be achieved by a supplier. Thus, a customer may have expectations that a supplier should provide delivery in two days, that delivery will actually occur in three days, and that it must occur within four days.