A comparative analysis of channel incentive programs in Brazil and the USA
International Journal of Emerging Markets
Article publication date: 18 April 2017
The purpose of this paper is to propose a channel incentive program conceptual framework. In order to do so, a consolidated theoretical effort was completed together with observations from two countries – Brazil and the USA – to build evidence toward the proposed framework.
This paper first proposes a theoretical framework for understating marketing channel incentive programs, conceptualizing it as being composed by four dimensions being control, benefits, exclusiveness and formalization, mediated by power distribution between dealers and manufactures. Second, the developed framework was used for a cross-country analysis. Three multinational firms, global leaders in the crop protection industry, were selected in Brazil and the same three were selected in the USA. For completing each case report for the six companies in total, 16 people were interviewed, besides documental research over companies’ documents.
The framework helped describing and understanding the different group of incentives used per firm and country. Indeed, there are much more similarities within Brazil or the USA, than the same company in these two countries. The institutional environment and the network structure were fundamental to understand why the power center was different in these two countries that resulted in different channel incentive programs. In the USA, programs are very clear and straightforward in regard to a powerful dealer. If the dealer develops five or six output tasks, margins would increase considerably. In Brazil, however, dealers have a wider array of activities accompanying output measures. If they perform well they receive support, but fundamentally manufacturers strongly influence dealers’ daily management decisions.
The incentive programs analyzed are mostly based on the set of standard documents manufacturers produced for dealers and on interviews for clarifying the content of the documents. Therefore, manufacturers probably set some relationship aspects aside since “individual approaches” to dealers might exist that were not captured in this study. Another limitation is the application to one sole industry that may per se present particularities that could be inducted too far the conceptual model that was built.
The framework as suggested might first help to organize the thinking of first identifying the power distribution between manufacturer and dealers and understanding institutional and network underlying causes. The framework might then help to select the right performance measures, benefits while keeping exclusivity and formalization levels in mind. Several types of control measures and benefits are presented as examples that can be adapted to a particular situation. Special concerns should be considered when managing marketing channels with incentives in an emerging market, but mainly, one must recognize the need to identify resources limitations (financial, knowledge, or infrastructure). Second, institutions work quite inefficiently, which means that beyond legal enforcements, firms may rely heavily on additional coordination mechanisms such as incentives schemes and communication strategy to build a more social and bilateral control mechanism. Third, a manufacturer should recognize that even if they currently hold a less-dependent position to dealers, the dynamics of an emerging market may quickly change the dependence structure.
The paper brings together a literature review and consolidation over the topic of channel incentive programs, proposes a framework to be used by researchers or practioners and dive in three pairs of companies in different countries to analyze why management practice should be adjusted. Differences in developing and developed countries are highlighted and the impact on channel incentives.
Castro, L.T., Neves, M.F. and Akridge, J.T. (2017), "A comparative analysis of channel incentive programs in Brazil and the USA", International Journal of Emerging Markets, Vol. 12 No. 2, pp. 263-278. https://doi.org/10.1108/IJoEM-02-2014-0016
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