Marketing Channels- Managing Conflict to Increase Channel Coordination

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  • 1. Marketing Channels Chapter 7 Managing Conflict to Increase Channel Coordination
  • 2. Outlines
    • What is channel conflict?
    • Measuring conflict
    • Damage to the channel
    • Source of conflict
    • Gray markets
    • Fueling conflict
    • Conflict Resolution Strategies
    • Institutionalized Mechanisms to Contain Conflict
    • Conflict Resolution Via Incentives
  • 3. What is channel conflict?
    • Channel conflict is behavior by a channel member that is in opposition to its channel counterpart.
    • It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart.
  • 4. Level of conflict
    • Latent conflict
    • Perceived conflict
    • Felt or affective conflict
    • Manifest conflict
  • 5. Measuring Conflict
    • Measuring conflict is a Four steps process
    • Issues
    • Importance
    • Frequency of disagreement
    • Intensity of dispute
    Conflict = ∑ Importance i x Frequency i x Intensity i N i = 1
  • 6. Damage to the Channel
    • High levels of manifest conflict damage long-term relationships in the channel
    • Conflict leads to
      • Decreased economic satisfaction
      • Decreased non-economic satisfaction
      • Loss of trust
      • Reduced commitment
      • Coalitions
  • 7. Sources of Conflict
    • Goal conflict
    • Perceptual conflict
    • Domain conflict
  • 8. Sources of Conflict
    • Goal conflict
    • Agency theory underscores how competing goals create conflict in principal-agent relationship.
    Manufacturer (Nike) Retailer (Foot Locker) Higher margin for self Higher margin for self Higher price to reseller Lower price to reseller Lower price to end-user Higher price to end-user Reseller holding more inventory Reseller holding less inventory No allowances More allowances Increase unit sales Increase unit sales
  • 9. Sources of Conflict
    • Perceptual conflict
    • Differing perceptions at even very basic levels
    • Inaccurate expectations of actions of the other
    • Different focus
    Manufacturer Channel member own processes and product own processes and customers Lack of communication Different cultures
  • 10. Sources of Conflict
    • Domain conflict
    • Occurs when one channel member perceives that the other is not taking proper care of its responsibilities.
    Manufacturer Retailer Sell to multiple segments Retailer’s target segments Intensive distribution Selective distribution Category exclusivity with full line of brand Assortment of best-selling models of various brands
  • 11. Sources of Conflict
    • Multiple channels
      • Now very common
        • Heightened competition
        • Fragmented markets
        • Technology allows management of more channels
      • Suppliers like multiple channels
      • Customers like multiple channels
      • Resellers don’t like multiple channels
        • Free-riding
        • Customers do not stay within their intended channels
  • 12. Gray Markets
    • Selling authorized goods through an unauthorized channel
    • Occur when:
    • Differential pricing to different channel members
    • Pricing differently to different geographic markets
    • Effects
    • Manufacturer cannot effectively sell at different prices in different markets
    • Erodes potential volume for authorized dealers who may also provide after-sales service
  • 13. Gray Markets
    • Growing quickly
    • Often tolerated
    • Violations difficult to detect
    • Gray markets sometimes give more category exclusivity
    • Costs of taking action against gray markets often more than the benefits
    • Manufacturer gets greater market coverage
    • May be an intended channel
  • 14. Fueling Conflict
    • Conflict creates more conflict
    • Bad history
    • Threats
  • 15. Conflict Resolution Strategies
    • Institutional mechanisms to contain conflict
      • Information-intensive mechanisms
      • Share information
      • Joint membership in trade associations
        • Co-optation
      • Personnel exchange
      • Third-party mechanisms
        • Mediation
  • 16. Conflict Resolution Strategies
    • Institutional mechanisms to contain conflict
      • Building relational norms
        • Flexibility
        • Information exchange
        • Solidarity
  • 17. Conflict Resolution Styles Compromise Collaboration or Problem Solving Competition or Aggression Avoidance Accommodation
  • 18. Conflict Resolution Via Incentives
    • Economic incentives
      • Effective
      • The package of factors that collectively create financial returns for the channel member
  • 19. Q&A