Reports

Assessing Reseller Performance From the Supplier’s Perspective

Nirmalya Kumar, Louis W. Stern, and Ravi S. Achrol, 1992, 92-101

Background
To manage marketing channels one must establish some means of measuring the effectiveness of channel partners with which a firm is linked. A survey of marketing channels research indicates that there are disagreements on both the criteria and the methodology to be employed in measuring reseller performance from the perspective of a supplier. Furthermore, in interviews with various well-known and highly reputable suppliers, we discovered that no comprehensive and systematic means of evaluating reseller performance exists. We found very limited hard data on resellers to be available from the accounting records of these suppliers. Whatever hard data were available did not represent all the criteria on which the suppliers believed their dealers should be evaluated.

To derive the relevant criteria we began by examining the literature on organizational effectiveness. We defined the goals of a supplier and then derived ways in which resellers could help achieve these goals. A comprehensive analysis resulted in the development of the following eight facets of reseller performance: contribution to sales, contribution to profits, reseller compliance, reseller loyalty, reseller competence, customer satisfaction, contribution to growth, and reseller adaptation.

Based on our theoretical model, we developed three different types of scales (composite, global, and facet) and used them to evaluate reseller performance for two different suppliers. We evaluated each reseller's performance by administering these scales to two different, highly knowledgeable employees in the supplier's organization. To arrive at an organizational evaluation of the reseller's performance, the informants were asked to reconcile any differences of opinion they may have had using face-to-face discussion.

Findings
The results indicated that all three types of scales demonstrated adequate reliability and validity. For both firms, there was little convergence between hard data available from the accounting records and the ratings on the proposed scales. An examination of how well the hard data and the proposed scales predicted other constructs (such influence over supplier, satisfaction, and conflict) indicated that the scales had greater validity. In addition, we administered to executives of the two suppliers a survey on the importance their organization should place on each of the different facets. After averaging the weights the executives assigned to these facets we found that all of the facets were considered to be important. But the range of weights suggested that there was little consensus among managers about the importance of any single dimension.

Implications
The results of this study indicate that managers consider criteria beyond the obvious short-term facets of sales and profits when evaluating reseller performance. They disagree markedly, however, about how much each dimension of performance should be weighted. This means that there may be little consensus within firms on what good reseller performance really means. And if managers don't know what it means, they certainly can't direct, in any meaningful way, efforts to achieve it. Our results may help in this respect, because they provide several reliable and valid scales to use in measuring reseller performance. The scales themselves, along with the data they generate, may encourage management to come to consensus. And this shared vision may, in turn, lead to more focused and effective channel strategies.

Nirmalya Kumar is Assistant Professor of Marketing, Smeal College of Business Administration, The Pennsylvania State University. Louis W. Stern is the John D. Gray Distinguished Professor of Marketing, J. L. Kellogg Graduate School of Management, Northwestern University. Ravi S. Achrol is Visiting Associate Professor of Marketing, George Washington University (on leave from the University of Notre Dame).

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