Amity Business School MBA(M&S) Class of 2010, Semester II Channel Management Power, Conflicts and Control Prof. P K Bansal
Multi-Channel Marketing System Channel Options Direct Marketing Sales Force Intermediary Marketing Channel
Channel Management 1 Use of Power Bases 2 Resolving Channel Conflicts 3 Channel Control
1 POWER BASES Referent Power Expert Power Legitimate Power Competition Power Coercive Power
Driven from the position the company holds in the industry.
It comes from instant recognition and respect associated. (Nestle, Vijay Sahu)
Specialised knowledge on developing business, available with a channel member, which adds constant value to the channel operation to perform well. (HUL)
Legal power to enforce agreement or contract signed with the company as regards to distribution / sales / credit etc. (HUL, Brooke Bond) `
Company can provide additional support to channel partners to increase volumes viz. promotions, distribution costs and awards etc.
Ability to generate rivalry among channel partners to compete in contests and targets etc.
Provide incentives to the channel partners to perform additional tasks at specific points of time.
It is only for a specific duration and task.
Power of a threat to the defaulting channel partner e.g., take away some support, discount, appoint more distributors or persuade to extend credit to important customers.
Used by companies having established distributors with very high dependence on the principal to stay in business.
USE OF CHANNEL POWER
Power is part of any channel network as the ability to influence the actions of other channel members.
All players are dependent on each other.
The extent of dependence of one on other decides appropriate power base.
The influence is necessary to the overall batter performance of the system in delivering customer service objectives.
Power is the instrument of influence to make the other member willing to act in situations they normally would not have acted in that manner.
Exercising power is not exploitation or force or pressure, but value adding in context of channel management.
Dependence of channel members on each other is based on the benefits they can drive.
Channel members consider themselves important and powerful if the company is dependent on them but this perception of power has no value if company can find alternatives.
Dependence is determined by:
How important is the business of the principal to the channel member.
How good the channel member is as a channel partner.
How good the company products / New product launches are perceived.
Channel partner working in the best interest and working parameters of the principal.
Not only the Channel principal, but channel partner can also have advantage over the principal / other members by having referent and expert power over his own customers which is equally valuable to the company. This power is called, Countervailing power .
This dependence in channel relationships is very critical in reducing confrontation and improves co-operation for good performance of the channel.
The interdependence can be deadening for the ancillaries solely dependent on the principals with the declining business.
Distributors therefore shy away from being exclusive for any single company unless it is a company like HUL, P&G, Nestle, L&T or Maruti.
2 CONFLICT GOAL Understanding of objectives of Channel members is different DOMAIN Channel members Understand Responsibilities differently PERCEPTION Understanding of Market Place is different. Actions do not match
What is Channel Conflict?
Channel conflict is a situation of discord or disagreement between channel members from the same marketing channel system.
Conflict always has negative connotations and is driven more by feelings than fact.
It is initially latent and does not effect the working of the channel members.
It is not possible to detect till it reaches a level of disruption.
Opposing Behaviour/ Direct Competition with trade partners
Understanding the nature of conflict and its impact.
Tracing the source of the conflict.
Understand the impact of the conflict.
Strategy and Plan of action for resolution.
Joint membership of trade associations
Distributor councils/ unions used as a medium of coercive power
Mediation through trade associations
Sharing of information between channel partners
Use of third party for mediation
Clear rules of conduct to help build relationship
Use of incentives and rewards based on performance as part of conflict resolution
Styles of Conflict Resolution
Used by weak channel partners where relationship is not of much importance. The problem is postponed only.
Used by the dominant member using coercive methods.
A situation of complete surrender. One party helps other without being worried about its own goals. Situation can also lead to exploitation.
Finding mid way solution. Can only work with small and not so serious conflicts.
Win-Win situation. Information sharing approach.
Minimising Channel Conflict
Define appropriate approaches for the Channel
Make Initial Investment
Internet Link to Customers
Shift volume to new Channel by Promotion
Supplier Controls Customers
Look for WIN-Win
Look to sell New Products through New Channels
Identify New Value Proposition
Act Fast / Independently
Fill Gaps in Channel Coverage
Channel Controls Customer Market Power Significant Insignificant Value added by Channel
3 CHANNEL CONTROL PROTECTION Interest of all Channel Members are protected OBJECTIVES Actions of all are in line with overall objectives DELIVERY Channel Flows streamlined to service end customers
Maintaining Cordial Relationship
Cordial relationship require similar goals for channel members regarding the various aspects of relationship to achieve effectiveness and efficiency in the process of delivering service of outputs required by end users.
Convergence is essential in terms of individual goals of all the channel members with a collaborative process by:
1) Frequent and Effective Communication of Information.
2) Proper Grievance handling system.
3) Proper distribution of roles, resources and power.
Channel Relationship Maintenance Strategies Forcing by Domination Withdrawal by avoidance Transactional Integration by Negotiation Compromise by Sacrifice Long Run Nature of Relationship High Low Significance of Individual Goals
Sales and Distribution Management; P K Agarwal & Manoj Kumar; Pragati Prakashan
Sales and Distribution Management; Krishna K Havaldar & Vasant M Cavale; Tata McGraw-Hill Pub. Co. Ltd.