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 Learning Objectives
‡ Understand how and why channel conflicts
occur
‡ Look at ways of managing conflict
‡ Channel practices followed to resolve
conflicts
‡ Principles of channel management
‡ Various parameters on channel policy
‡ Way in which   use marketing
channels

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 Channel Management
‡ Is in three broad phases:
± Use of power bases
± Identifying and resolving channel conflicts
± Channel co-ordination

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 Use of Power Bases
‡ Channel system has a set of players:
± Not equally motivated to implement the ideal
channel design
± Whose expectations from the system differ
‡ Use of the 5 power bases brings diverse
channel partners in line for effective
implementation
± 5 power bases are: reward, coercion, legitimate,
expert and referent (French & Raven)
± Two more power bases in the Indian context are
support and competition
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 Use of Channel Power
‡ Channel members are dependent on each
other. The power equations between them
keep them working together.
‡ There are basically 5 types of power bases ±
reward, coercion, expert, reference and
legitimacy. 2 more can be considered as
support and competition.
‡ Extent of dependence defines the power
base which is appropriate.
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*Power´ of Motivation
‡ Reward ± incentives for good performance
‡ Coercion ± threat of punishment for non-
performance
‡ Referent ± benefit of sheer association with a
strong company
‡ Legitimate ± arising out of a contract
‡ Expert ± specialized knowledge
‡ Support ± additional benefits for better
performers only
‡ Competition ± created between channel
partners 

 

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 Countervailing Power
‡ Balances the power exerted by one channel
member. It is not a one-sided equation.
‡ Both the channel member and the principal
can have influence on each other.
‡ Results from interdependence within the
channel system.
± Company exerts power on the distributor to get its
coverage and revenues
± Distributor has enough influence on his customers
and this is critical for the company also
± Weaker partners do get exploited ± ancillary units
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  †

 Channel Co-ordination
‡ Channel system is well co-ordinated if each
member understands his role correctly and
performs it to help the system achieve its
customer service objectives.
‡ In a co-ordinated channel:
± Interests of all channel members are protected
± Actions of all are in line with overall objectives
± Flows are streamlined to desired customer service
objectives
‡ Channel co-ordination is an on-going effort

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 Channel Conflicts
‡ Conflict is generated when actions of any
channel member come in the way of the
system achieving its objectives
‡ Three broad categories of channel conflict
are:
± Goal conflict ± understanding of objectives by
various channel members is different
± Domain conflict ± understand responsibilities and
authority differently
± Perception conflict ± reading of the market place is
different and proposed actions vary

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 Channel Conflict

 

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 Channel Conflict
‡ Situation of discord or disagreement between
partners in the same channel system ± has
negative connotations and is driven more by
feelings than facts
‡ Conflict is part of any social system ± getting
disparate entities to work together as in a
channel system is also one such social unit
‡ If any member feels that another is working in
a manner as to affect him, conflict results
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 Conflicts Result From«
‡ Each channel member wanting to pursue his
own goals
‡ Each wants to retain his independence
‡ There are limited resources which all of them
want to utilise in achieving their goals
‡ Features of conflicts:
± Initially latent and does not affect the working
± Is not normally possible to detect till it becomes
disruptive
 
 

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 Four Stages
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Each stage is progressively more severe than the earlier one



 
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 Types of Conflicts
‡ Latent Conflict:
± Some amount of discord exists but does not affect
the working or delivery of customer service
objectives.
± Disagreement could be on roles, expectations,
perceptions, communication.
‡ Perceived Conflict:
± Discords become noticeable ± channel partners
are aware of the opposition.
± Channel members take the situation in their stride
and go about their normal business
± No cause for worry but the opposition has to be
recognized
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 Types of Conflicts
‡ Felt Conflict:
± Reaching the stage of worry, concern and alarm.
Also known as ù %%
& conflict.
± Parties are trying to outsmart each other.
± Causes could be economical or personal
± Needs to be managed effectively and not allowed
to escalate.
‡ Manifest Conflict:
± Reflects open antagonistic behaviour of channel
partners. Confrontation results.
± Initiatives taken are openly opposed affecting the
performance of the channel system.
± May require outside intervention to resolve
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 Reasons for Channel Conflict

‡ Roles not defined properly

‡ Allocation of scarce resources between
members seem unfair to some
‡ Differences in perception of the
business environment

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 Reasons for Channel Conflict

‡ Future expectations not likely to materialize

‡ Decision domain disagreements ± who has to
decide on what (key account pricing)
‡ Channel members do not agree on objectives
‡ Misunderstanding or mis-interpretation of
routine business communication

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 Resolving Conflicts
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 Conflict Resolution Styles
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 Avoidance
‡ Used by weak channel members.
‡ Problem is postponed or discussion
avoided.
‡ Relationships are not of much
importance.
‡ As there is no serious effort on getting
anything done, conflict is avoided.

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 Aggression
‡ Also known as a competitive or selfish style.
‡ It means being concerned about one¶s own
goals without any thought for the others.
‡ The dominating channel partner (may be the
principal) dictates terms to the others. Long
term could be detrimental to the system.

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 Accommodation
‡ A situation of complete surrender.
‡ One party helps the other achieve its goals
without being worried about its own goals.
‡ Emphasis is on full co-operation and flexibility
in approach. May generate matching feelings
in the receiver.
‡ If not handled properly, can result in
exploitation

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 Compromise
‡ Obviously both sides have to give up
something to meet mid way.
‡ Can only work with small and not so
serious conflicts.
‡ Used often in the earlier two stages.

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 Collaboration
‡ Also known as a problem solving approach
‡ Tries to maximize the benefit to both parties
while solving the dispute.
‡ Most ideal style of conflict resolution ± a win-
win approach
‡ Requires a lot of time and effort to succeed.
‡ Sensitive information may have to be shared

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 Channel Policies
‡ Defines how the channel is required to
operate.
‡ Normally framed by the channel principal to
guide the operations of the channel system
‡ If not framed properly could prove the starting
point of channel conflicts.
‡ Some subjects of channel policies could be
as seen in the next slide:

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 Channel Policies
‡ Markets to be covered
‡ Customer coverage
‡ Pricing
‡ Product portfolio to be handled
‡ Selection, termination of channel
members
‡ Ownership of the channel
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 The Services Sector
‡ Twice the size of the manufacturing sector
‡ Services offered are to be in line with
customer demand
‡ Services have to be presented in an
appealing manner to sustain customers.
‡ Needs specialized channels which
understand the characteristics of service
delivery

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  †
 5 Characteristics of Services
‡ They are intangible ± can only be felt. No
visual features like size, style.
‡ They are inseparable from their service
providers ± a 3P cannot deliver
‡ They cannot be standardized ± custom made
and delivered
‡ Customers are involved to a great degree ±
define the services
‡ They are perishable ± cannot be stored for
delivery later. Salvage value of an unsold
service is zero.
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 Channels Used
‡ Shorter channels than for products
‡ Some channels used are:
± Direct from service provider to user
± Agents or brokers to bring buyer and seller
together
± Franchisees or contractors
± Electronic channels
‡ High degree of customization is provided

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 'ey Learnings
‡ Channel management is done by: use of power
bases, identifying and resolving channel conflicts and
co-ordination
‡ Channel conflicts could occur due to: goal conflicts,
domain conflicts and perception conflicts
‡ Channel conflicts pass thru¶ the 4 stages of latent,
perceived, felt and manifest.
‡ Conflicts are avoided with the use of power bases of
rewards, coercion, expertise, legitimacy and
reference.
‡ There are 5 styles of conflict resolution: avoidance,
aggression, accommodation, compromise and
collaboration
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 'ey Learnings
‡ Channel conflicts are resolved by joint membership of
associations, exchanging personnel or arbitration
‡ Channel management involves the four steps of
planning, organisation structure, control of the
channels and measuring performance for continuous
improvement
‡ Services are distinguished by 5 characteristics of
being intangible, inseparable from service providers,
cannot be standardised, customers are involved in
service delivery and are perishable. Distribution
channels should take these into account.

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