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KOEHRING OOMPANY

Evaluating Channel Member performance

The Koehring Company, Milwaukee, manufactures and

performance be effectively communicated to corporate

headquarters and between divisions?

In short, an efficient

evaluation procedure

was

called for; one that would uniformly measure distributor

performance.
development.

The number of the company,s divisions and its an_

sales have grown in recent years, and so has the

nual

number of distributors selling Koehring products. Com_

plicating the Koehring distribution setup is the fact that
some distributors handle several of the company's con_
struction equipment lines, while others carry only one or
two lines of company manufacture .
Several years ago, the company reviewed its methods

of distributor evaluation, which at the time were ,,subjective, irregular, and fragmentary," Routine appraisals were
not a part of company procedures, and when manage_

ment asked field salespeople about the performance of

an individual distributor, the answer elicited often ran,

'Well, they're doing all right,,' ,.They could be beuer,,,or

something equally vague.
Finding this approach to distributor evaluation un_
satisfactory, management decided the company needed
a better and more comprehensive reporting system_
namely, one that would give both the divisions and cor_
porate headquarters better knowledge and control ofdis_
tributor operations without having to wade through
volumes of disorganized, subjective information, One
problem of particular concern emanated from the un_
even performance of many distributors: they might be
doing an excellent job on certain Koehring lines, but a
poor one on others. How could intelligence about such

The Dealer Rating Form

The corporate marketing staff hit upon an answer-the
"Koehring Dealer Rating Form,, which provides the basis
for an annual evaluation system. Exhibit I illustrates the
form.
The key to the rating system is found in the lower half
of the form and is known as the ',penetration Index.,,This

index is computed,

as the instruction sheet explains, by

dividing the annual dollar value of the dealer equipmenr
sales by the annual equipment sales quota that was as_
signed to the dealer at the beginning of the year. (Annual
quotas assigned to dealers for each Koehring product line
they carry are fixed with their advise and consenr.) The
penetration index is then converted into the dealer rat_
ing. (Exhibit 2 is the instruction sheet.)

To take a hlpothetical example:

If a dealer,s annual

equipment sales amount to $100,000 and an equipment

sales quora was set ar $110,000, then $100,000 divided by
$110,000 equals 0.909, which falls in the penetration in_
dex range of 0.9 to 1.1, A penetration figurc in this rangc
equals a dealer rating of 3, which is considered .'average. ',
Dealer ratings range from 1 (excellent) to 5 (poor).
The performance rating developed in this manner
is not necessarily the final rating the distributor receives.
617

618

Case

2I

Koehring

Company

,'<

KOEHRING COMPANY DEALER RATING FORM

,

Fiscal

Dealer Name:

yeu:

Dlr. Code No.

MAIN OTTICE AND BRANCTIES

(List main of,Ece firsr)

Tlpe of

sales

coneact or products under

Products

sales

f.mchi!

Exclwive

Koehring Company Represen tation

Div.
Schield
Prsons

Non

Koeh.

excluive

Buf. Spr..,

Kr^,ik-Mix

Johnson
KO-C,{L

,,

Orher major accounts handled:

Regional representative (Name )

Region or frea no.

Credit rating:,,

Dealer sales, (AlI accouts)

'I

Profit

NetWorth

OA9

1963

1964
1965

Division Dealer Volume

Equipment

Parts

Total

Votue
quota

(Equipmenr) B

1961
1962
1963
1964
1965

Performance rnting:

Action in

tPenelrationladex =

ueabr Pt
Total
divirion
den. mles

Penetratioa
Index

/,

Ratings and

Potentials

619

1/t
I

nstruction Sheet for Koehringl Annual Dealer Rating

next year.

As described irr steps 4 and 5 on the instruction sheet,

the computed rating is next evaluated "in terms of the
dealer's fofal performance," so that the rafing can he frrrther adjusted if warranted.
An indepe ndent rating is prepared on each distributor for every Iloehring product line represented. If nvo
or more company lines are carried, the distributor receives indepenrlent ratings for each line, and no overall
rating, combinr:ng prformance ratings on each line, is
computed.

Ratings and Potentlals

A srrpplement3ry cheek nn the rompany's distrihrrtor
organization is made by matching the deaier's rating
witb that state's construction-potential classification.
Thc classification by state and its use are described
in an instruction sheet, as follows:
To help in reviewing and evaluating the annual dealer
perfbrmance ratings on a more objective basis, each

620

Case

21

Koehring Company

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PerformanceReports
state has been classified according to its annual potential. The potential for each state is based on dollar
volume expressed as a percent of the total U.S. contract awards for engineered construction projects relevant to each Koehring division.
Alphabetical potential classificarions are assigned
to each state based on the dollar volume awards expressed as a percentage of total U.S. construction
awards for each division's category. The following key

shows the range

potential class:

of

percentages comprising each

Potential
Classifuation

Range of the Percent of

Tbtal U.S, Autards per Class:

67o and over

5.0-5.9Vo

B
C

4.04.9

3.0-3.9
2.0-2.9
1,0-1.9
0.0-0.9

F'

Thus, a state classified as having 'A" potential would

account for 6 percent or more of the dollar awards
made in the country for projects most likely requiring
a particular division's equipment.

Management believes that, while excellent dealers everywhere are of course desirable, states with the heaviest
concentration of business should have dealers with suoerior performance ratings.
Thus, a dealer in an 'A" or "B" state achieving a per-

formance rating of 4 or 5 would indicate that a great deal

of business in that state remains untapped or, at i;;r,.y ra:te,
is not falling to the company.
Ratings of distributors are carried out by district
sales representatives, in conjunction with their sales managers, at least once per year.

Performance Roports

621

for any distributor may be

ascertained at once; and,

since the data are arranged by states and provinces, the
distributor may also be measured against all colleagues

in the same area. Also, the qualiry of any division's

representation in any area is immediately apparent. The
report is, in effect, a composite of all ratings of all
dealers through which the products of Koehring's divisions are sold. AIso shown are the two most recent
years' ratings for each division on each of iS distributors, giving a further quick comparison of distributor
performances.
The second report on annual dealer ratings by divisions, in bar chart form, shows the composite quality of
each division's distributor representation during the year
(Exhibit 4). Of 79 dealers rated by the Schield Bantam
division, the chart indicates that 5 percent of this division's dealers earned Rating I (excellent); 23 percent,
Rating 2 (good); 40 percent, Rating 3 (average); 23 percent, Rating 4 (fair); and 9 percent, Rating 5 (poor) .
The dealer ratings form the basis for supplementary
reports that receive limited distribution and are for special internal use. In addition, the ratings are helpful in
discussions ofproblem areas and problem distributors at
companfuide sales meetings.
The corporate marketing staff, which is responsible
for all statistics, market research, and market analyses, including the annual dealer ratings, acts as a clearinghouse
for divisional marketing intelligence and prepares the
consolidated reports for management.
According to the company, cooperation of the sales
force in filling out and sending in dealer ratings has been
excellent, and the field sales force is solidly in favor of the
dealer rating system.
Commenting on the pros and cons of the of the
approach, a Koehring marketing executive points out:
"There are too manyvariables, of course, to evaluate our
distributors completely and with absolute accuracy by
this uratherual.ical rrredrod. Thc huruarr clerrrent t-rfjudgment cannot be eliminated-nor should it be. We do

While a number of company reports are drawn, to a

greater or lesser extent, from the annual dealer rating

feel, however, that we are on the right track by evaluating

process, two are reported to be especially useful to man-

achieved for all distributors by rating them all on the

agcment: a rcport on "II.S. Construction Equipment

sarne basis.

Dealers Performance Ratings" and a summary

nual Dealer Ratings by Divisions."

of

in this

manner,

in that a

common denominator

is

"An-

"Then, and only then, may the refinements, modifi-

The first gives the performance rating for every domestic and Canadian distributor for every division in the

cations, and exceptions be noted and taken into account.

In this way, the 'by gosh and by golly' sort of approach is
eliminated. In general, we are most pleased with our
evaluation procedures,"

company (Exhibit 3). The entire annual performance

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Case

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Koehring Company

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Schield Bantam Dlvlsion

Number

234
Rating

Discussion euestion
l.

Evaluate Koehring,s approach to measuring

channel member performance