Designing the Distributor Evaluation Criteria with reference to the Indian Consumer Durable Industry

rnMahesh BhanushalirnAssistant Professor Dr. V. N. Bedekar Institute of Management Studies mahbhanu87@gmail.com Dipti PeriwalrnAssistant Professor Dr. V. N. Bedekar Institute of Management Studies dipti_shakrani@yahoo.com Abstract: Identification and Performance evaluation of distributors in western countries has been one of the most important activities in consumer durable industry. Unfortunately less focus has been given towards this activity by most of the firms located in India. It has been realized that criteria related to distributor selection and evaluation need to be identified. The Indian consumer durables industry has witnessed a considerable change in the past couple of years. Changing lifestyle, higher disposable income coupled with greater affordability and a surge in advertising has been instrumental in bringing about a sea change in the consumer behavior pattern. The performance of distributor plays significant role on overall growth of any consumer durable firm. The current study made an attempt to verify and analyze the relationship of distributor’s performance and growth of respective firm. The objective of the paper is also to design the distributor performance evaluation criteria for effective monitoring and control mechanism for consumer durable firm. Keywords: Distributor, Consumer Durable, Performance, Evaluation, Delivery, Service IntroductionrnIndia is likely to emerge as the world’s largest middle class consumer market with an aggregated consumer spend of nearly US$ 13 trillion by 2030, as per a report by Deloitte titled ‘India matters: Winning in growth markets’. With the continuous inflow of disposable income and the advancement of technology, the need for the varied consumer durable goods are increasing. This in turn is leading to a strong competition among the different consumer durable brands available in the nation as well as the price gap between the same consumer goods of different companies are narrowing down. Day by day these goods are becoming cheaper. The rural and urban market of consumer durables has been growing at a rate of around 15 % on an average. The importance of distributors is growing rapidly. Growth of the distribution channel partner determines the growth of firm. This requires continuous monitoring of distributors performance. Literature ReviewrnAnderson and Narus (1990) reported that it is mutually recognized and understood that the success of manufacturers and distributors depends on the other firm. Their statement indicates that a manufacturer’s success can not be reached from their own effort alone; having a good partner in distribution is very important. Loomba (1996) also suggested that in order to compete effectively, today’s firms must re-evaluate their existing distribution and make adjustments when necessary. Hyvönen and Tuominen (2007) claimed that the changing business environment has recently challenged many firms to seek out new methods to achieve sustain performance advantage through market orientation and distribution channel collaboration. Secondly, distribution channel strategies affect many other aspects of marketing strategies. Changing the distributor is often too costly. In the long run, distributor and distribution channel strategies involved in strategic alliances and partnerships that are founded on trust and mutual benefits create distinguishable interests (Chopra and Meindl, 2007). As per a research done Global Technology Distribution Council Distribution efficiency and cost-effectiveness are driven by economies of scale. These economies are undermined when vendors appoint too many distributors within a market. Of course, vendors want to ensure that they have a competitive discipline in their distribution model and the capacity in their channel to handle demand and growth. But the larger distributors now have the diversity of capability required to service different market segments and handle different product categories, without vendors needing to farm out the business to multiple distributors. Vendors should constantly check whether they can benefit from consolidating the number of their distributors. According to the study by Levi and Weitz, 2008 Strategic management of distribution channels and the choice of the distributor is growing in the business scenario. There are several reasons for this. Firstly, as the value has shifted towards the customer, distribution has moved from being the backwater of strategy to the mainstream. Since it is where much of the profit in many industries can be found nowadays (Wise and Baumgartner, 1999) Effective distributor monitoring system is one of the key challenges of consumer durable Industry. Very less efforts have been taken in this area with reference to the Indian Markets. Above all researchers suggest the contribution and importance of Distribution system for the growth of the firm. This research paper tries to provide the solutions to the key challenges of handling the distribution system and this is the area where significant efforts have not been taken from the research perspective. Research ProblemrnMany businesses have trouble getting a handle on their relationships with the companies that distribute their products or services. That’s because these distributors are like employees or salespeople in some ways; they’re the outlet through which the supplier reaches the marketplace. Growth of the distribution channel partner determines the growth of the firm. This requires continuous monitoring of distributors performance. Distributor always pushes the brand which gave higher margins and low cost. Distributors are not responsible for carrying the right brand image in this complex and dynamic environment. This is the problem area of the research which can be minimized with the implementation of an effective distribution system. Data CollectionrnPrimary Research was conducted for 15 consumer durable companies in India. The list includes following: firm. Secondary research data will be based on reputed magazines, research papers, and handbooks. The questionnaire was prepared with the 5 likert scale being 5 as highest (strongly agree) and 1 as a lowest (strongly disagree). The collected data is analyzed with SPSS version 21. Statistics and FindingsrnResearch was conducted for 15 consumer durable companies in India to understand the impact of Distributor Performance on the growth and performance of respective consumer durable firm. The study was conducted to understand the impact of distributor evaluation and monitoring on the growth of that distributor and Firm. The survey conducted shows the following: Table 1: Distributor’s Performance affecting Growth of Consumer Durable Firmrn The table shows that more than 80 percent of the consumer durable organizations think that performance of the distributor is crucial for the growth of the organization. Table 2: Impact of distributor evaluation and monitoring on the growth of that distributor and Firmrn Strongly Agree Agree Do not know Disagree Strongly Disagree 70 % (28 out of 40) 10% (4 out of 40) 7.5% (3 out of 40) 7.5 % (3 out of 40) 5% (2 out of 40) The table shows majority of consumer durable organizations think that distributors need to be evaluated to have control on them. The research has 40 respondents who are the Marketing managers of the respective consumer durable Table 3 : Impact of Performance monitoring of distributor on growth of the organizationrnTable 6 : Performance and Growth of Distributor Frequency Percent Valid Percent Cumulative Percent Strongly Disagree 1 2,5 2,5 2,5 Disagree 5 12,5 12,5 15,0 Valid Can’t judge 2 5,0 5,0 20,0 Agree 10 25,0 25,0 45,0 Strongly Agree 22 55,0 55,0 100,0 Total 40 100,0 100,0 The table supports the idea of relationship between the performance monitoring of distributor and growth of the respective consumer durable firm. Table 4 : Do you think that Growth of Distributor leads to Growth of Firm? Consumer durable organizations think that performance of the distributor plays important role in the growth of the organization. Designing the evaluation criteria for the consumer durable distributors:rnWe have worked with 20 Marketing managers for designing the suitable evaluation criteria: Table 5: Do you think that your company has effective distributor monitoring/evaluating system? Yes No 20% (8 out of 40) 80% (32 out of 40) This statistics shows that 80% of consumer durable firms think that they don’t have effective evaluation/ monitoring of their distributors. This shows the significance of designing the criteria of evaluation which may include all viewpoints of firms. of distributors performance. Analysis shows that 82.5% of respondents agree with the fact that there is a significant impact of Distributor Performance on the growth and performance of the respective consumer durable firm. Majority of the respondent (80%) think that there will be a significant impact of distributor evaluation and monitoring on the growth of that distributor and Firm. It can be concluded that majority of Marketing Managers thinks that Distributor’s Performance Monitoring leads to Distributor Growth. It also has been observed that majority of Marketing managers thinks that their distributor evaluation system is poor. ConclusionrnGrowth of the distribution channel partner determines the growth of the firm. This requires continuous monitoring The designed criteria will be very helpful for consumer durable firms to evaluate them and monitor the performance of distributors. We suggest evaluating the distributor quarterly on the said parameters. The distributors need to be differentiated on this basis into three categories such as tier 1, tier 2, tier 3, depending upon the wattage given for each criterion. We suggest deciding the credit facilities of distributors based on the position of respective tier category they achieved from evaluation. 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