Ideally, the channel manager would like to set margins so that they would vary in direct…

Ideally, the channel manager would like to set margins so that they would vary in direct proportion to functions performed by different classes of channel members.11 In reality, however, few manufacturers have the power or cost accounting data to set margins in strict accordance with this guideline. Margins at the wholesale and retail levels and for various types of agent intermediaries are typically governed by strong traditions that permeate the industry. Precipitous downward deviations from these norms are feasible only for the most powerful manufacturers. Nevertheless, periodic reviews of the margin structures available to different classes of channel members should be made, with a view toward making gradual changes if warranted. Oxenfeldt suggests that questions such asthe following be posed in this review:

1. Do they extend credit to customers?

2. Do they deliver?

3. Do they help train the customers’ sales force?

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