Transcript Channel Conflict

Channel Conflict
Prof. Suvendu Kr. Pratihari
[email protected]
Prof. Suvendu Kr. Pratihari
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Channel System
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Vertical Marketing System
Horizontal Marketing System
Multi-Channel Marketing System
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Vertical Marketing System
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It is the conventional marketing system of a producer,
distributor and retailer.
Each of the channel members including the company act
independently and trying to run a profitable business.
When all these entities were to act together to provide
service to the end user, it would be called Vertical
Marketing System (VMS)
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Horizontal Marketing System
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This system operates between two or more unrelated
companies, but arrangement of working together
provided benefits to both, Commonly known as “tieups”
Each companies has seen their respective strength,
which can be exploit to its advantage.
Example – Supermarkets and airports having ATM of
leading banks
Exp – Big hotels having CCD outlets, Cell Phone
outlets etc.
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Multichannel Marketing
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Here, companies use two or more marketing
channels to reach different customer segments.
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Objectives
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To understand how and why channel conflicts
occur?
To explore different types of channel conflict
To discuss ways of managing channel conflict
Channel practices to resolve conflict
CASE: Bajaj Fan
CASE: Finolex
Cables
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Channel Management
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Channel Management is in three broad phases
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Use of Power to Motivate Channel Members
Identifying and Resolving Channel Conflicts
Channel Coordination
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Channel Conflict
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Channel conflict is generated when one channel
member’s action prevent another channel from
achieving its goal.
Conflict could be the result of :
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Each channel member wanting to pursue his own goal
Each wants to retain his independence
There are limited resources, which all of them want to
utilize to achieve their goal
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Sources of Channel Conflict
Difference in Goals: The objective of company and the
distributor may not always match.
Exp: Manufacturer may want to achieve rapid market
penetration through a low-price policy. Dealers, in contrast, may
prefer to work with high margin and pursue short-run
profitability.
Exp: In a situation of intense competition, the company would
like the distributor to enhance its inputs to his customers like:
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Increase frequency of market visit
Provide a sales force for full market and outlet coverage.
Extent more credit
Compromise with some of his margin and discount more
Keep more stock
Work market with ready stock
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Sources of Channel Conflict…contd.
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Difference of perception: The manufacturer may be optimistic
about the short-run economic opportunity and want dealers to
carry higher inventory, but the dealers may be pessimistic.
Resource Scarcity: Allocation among channel members of
valuable resources seems unfair to some of them.
Roles are not defined properly
Addition of New Channel Partner
Target Fixing Exercise
Extension of credit
Expectation of Channel Members
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Sources of Channel Conflict…contd.
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Intermediaries’ dependence on manufacturer : The exclusive
dealers such as auto dealers are affected by manufacturer’s
products and pricing decisions. This situation creates a high
potential for conflict.
Communication Difficulties : Misunderstandings or
misinterpretation of routine communication
Loss of Opportunity
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Types of Conflicts
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Vertical Channel Conflict: Conflict between different
levels within the sale channel
Horizontal Channel Conflict: Conflict between
members of the same level
Multichannel
Conflict:
It
happens
when
manufacturer has established two or more channels that
sell to the market.
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Managing Channel Conflicts
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Steps to undergo for resolving conflict
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Step-1: Understanding the nature of the conflict and
measuring its intensity
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Identifying and prioritizing the issues – Monitoring the
frequency of occurrence – Collecting the views of the parties
about the problem.
Step-2: Tracing the source of the conflict
Step-3: Finding out the consequence of the conflict
Step-4: Action plan for conflict resolution
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Conflict Resolution
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Adoption of Superordinate Goal: In this case, the channel
members come to an agreement on the fundamental goal they
are seeking. Whether it is survival, market share, customer
satisfaction or service quality.
Joint Membership in Trade Associations
Sharing of valuable information may develop trust and reduce
conflicts.
Clear rules of conduct to help build good relationship
Working together for sharing responsibilities
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Conflict Resolution…contd.
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Joint goal setting by the channel principal and its channel
members.
Use of channel motivation programs
Diplomacy
Use of legal and ethical practice
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The company can’t formally designate the territory to be covered by a
channel member. This protects both the company (in appointing more
dealers) and the channel members who can see beyond the designated
territory.
The company can not force the channel partner to sell any specific
product, which may be slow moving or fast moving
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Building Channel relationship
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For retailers – Payments for shelf-display space
High trade discount than competition
High margin for better distribution efforts measures n terms of coverage,
distribution and productive calls.
Strong promotional support
Support of field salespeople – Particularly in achieving secondary sales.
Challenging sales target and joint planning to achieve them.
Assured outdated stock return
Provide Sales Training to distributors’ sales men
Provide logistical support
Offering credit support
Generate customer leads and pass to channel members
Communicate promptly all crucial marketing decisions
Discuss with the channel partners for useful suggestions for implementation
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Thank You
Prof. Suvendu Kr. Pratihari
[email protected]
933 777 3456
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