Channel Relationship


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Channel Relationship

  1. 1. Channel Relationship
  2. 2. Contents Channel Relationship 1 Channel Control 2 Channel Power 3 Channel Conflict 4 5 Conflict Management 6 Negotiation Strategies 7 Case Study 1
  3. 3. Channel Relationship What is channel relationship? What is the importance of Channel Relationship?
  4. 4. Channel Relationship <ul><li>The relationships are defined in terms of interrelated concepts such as power, dependence, control, etc.. </li></ul><ul><li>Strong and sustainable relationship is important. </li></ul><ul><li>Channel leader sets channel wide objective. </li></ul><ul><li>Defining a channel leader is important. </li></ul>
  5. 5. Channel Relationship Transaction Specific Relationship or Discrete relationship Types of Channel Relationships Rational Exchange relationship 1 2
  6. 6. Channel Relationship <ul><li>Discrete relationship- parties do not have any commitment to each other. </li></ul><ul><li>Absolute freedom on the price or other terms. </li></ul><ul><li>There is no concept of channel leader. </li></ul>
  7. 7. Channel Relationship <ul><li>Rational exchange Relationship-parties are attached to each other to achieve a common goal. </li></ul><ul><li>Willing to sacrifice their individual goals. </li></ul><ul><li>Level of commitment is very high. </li></ul>
  8. 8. Channel Control <ul><li>Need for Channel control- </li></ul>Zone of indifference Optimize resource deployment Improved co-ordination of activities
  9. 9. Channel Control <ul><li>Future channel survival and success </li></ul><ul><li>Optimize deployment of resources </li></ul><ul><li>Controlling member must possess some authority </li></ul>
  10. 10. Channel Control <ul><li>Theory of Channel Control </li></ul>Pay- Off Function Tolerance Function Distributors profit earned Zone of Indifference Supplier Authority
  11. 11. Channel Power <ul><li>Emersons definition of power: </li></ul><ul><li>The power of A over B is equal to and based upon the dependence of B upon A. </li></ul><ul><li>The dependence of actor B upon Actor a is -: </li></ul><ul><li>Directly proportional to B’s motivational investment in goals mediated by A, and </li></ul><ul><li>Inversely proportional to the availability of those goals to B outside of the A-B relation </li></ul>
  12. 12. Channel Power <ul><li>El-Ansary and Sterns definition of power: </li></ul><ul><li>The power of a channel member is his ability to control his decision variables in the marketing strategy of another member in a given channel at a different level of distribution. For this control to qualify as power, it should be different from the influenced member’s original level of control over his marketing strategy. </li></ul>
  13. 13. Channel Power <ul><li>3 basic axioms in channel management: </li></ul>1 Channel members do not incline naturally towards coordinated behavior, 3 Channel power is necessary to alter actions by channel members to induce a more coordinated outcome. 2 The lack of natural inclination in this direction can and does cause sub-optimal channel outcomes,
  14. 14. Channel Power Sources of Power 1. Reward Power 2. Coercive Power 3. Expert Power 5. Legitimate Power 4. Referent Power
  15. 15. Source: Adapted from Narus & Anderson 1998 Promotional Support Training Market Research Company Policies Distributors firm incentives Responsiveness Systems Technical Assistance Incentive Programme Distributor Sales force Incentives - Financial returns - Quality Products - Comprehensive price - Reliable delivery -National Reputation Channel Core Elements Capability Development Programmes Components of channel offering Manufacturer Sales force Incentives
  16. 16. Channel Conflict <ul><li>Different Stages of Channel Conflict </li></ul>Attitudinal sources of Conflict Structural sources of Conflict Cognitive /Affective conflict Manifest conflict Conflict Outcomes Conflict resolution
  17. 17. Channel Conflict <ul><li>Attitudinal Causes of Conflict </li></ul><ul><li>Disagreement about Channel Roles </li></ul><ul><li>Future expectations </li></ul><ul><li>Present perceptions </li></ul><ul><li>Lack of communication </li></ul><ul><li>Structural causes of Conflict </li></ul><ul><li>Divergence in goals </li></ul><ul><li>Drives for autonomy </li></ul><ul><li>Fights over scarce resources </li></ul>
  18. 18. Channel Conflict <ul><li>Felt Conflict </li></ul><ul><li>Related to frustrations, disappointments, negative feelings </li></ul><ul><li>Agree to disagree </li></ul><ul><li>Manifest Conflict </li></ul><ul><li>Expressed behavior </li></ul>
  19. 19. Conflict Management <ul><li>Institutional Mechanism </li></ul><ul><li>Joint membership of association </li></ul><ul><li>Executive exchanges </li></ul><ul><li>Cooptation </li></ul><ul><li>Distributor councils </li></ul><ul><li>Interpersonal and third party Mechanism </li></ul><ul><li>Mediation </li></ul><ul><li>Arbitration </li></ul>Two mechanisms for Channel Conflict Management
  20. 20. Conflict Management Latent Conflict Felt Conflict Manifest Conflict <ul><li>Institutional mechanism </li></ul><ul><li>Joint membership of associations </li></ul><ul><li>Exchange of executives </li></ul><ul><li>Cooperation </li></ul><ul><li>Dealer councils </li></ul><ul><li>Third Party mechanisms </li></ul><ul><li>Meditation </li></ul><ul><li>Arbitration </li></ul>Negotiation Conflict Management methods at different stages of conflict
  21. 21. Negotiation Strategies <ul><li>Negotiation is a process where parties to the dispute set down mutual rules of engagement and work within these rules to achieve competitive advantage over the other party. </li></ul>
  22. 22. Negotiation Strategies Types Of Negotiation Strategy Accommodating Avoiding Compromising Collaborative or Problem Solving Competing or Aggressive
  23. 23. Negotiation Strategies Accommodative Collaborative/Problem Solving Compromise Avoidance Competitive/Aggressive High Concern for own interest Low Low High Concern for the other’s interest
  24. 24. Negotiation Strategies <ul><li>Factors affecting the adoption of negotiating strategies </li></ul><ul><li>Relative power of each party </li></ul><ul><li>Term orientation </li></ul><ul><li>Personal characteristics </li></ul><ul><li>History of interaction between the parties </li></ul>
  25. 25. Case Studies <ul><li>Johnson & Johnson trade boycott. </li></ul><ul><li>J & J is the baby care and personal care giant. </li></ul><ul><li>Reduced stockist margin by 3% in 1999. </li></ul><ul><li>Protests from stockists in South India. </li></ul><ul><li>TNCPSA – Tamil Nadu Consumer Products Stockist Association </li></ul>
  26. 26. <ul><li>Cadbury & Future Group price margin conflict. </li></ul><ul><li>Conflict over price discrimination. </li></ul><ul><li>Future Group’s Take: </li></ul><ul><li>We find their ‘conditional terms’ unacceptable, offering fill rates (stocks on shelf) of only 65% </li></ul><ul><li>Cadbury’s Take: </li></ul><ul><li>Sales from emerging markets like India are vital to global sales and therefore it is unlikely that Cadbury will discriminate on this front </li></ul>
  27. 27. Thank us for educating you!