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Channel Conflict: Historical Perceptions and Management Implications

Channel Conflict: Historical Perceptions and Management Implications






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    Channel Conflict: Historical Perceptions and Management Implications Channel Conflict: Historical Perceptions and Management Implications Presentation Transcript

    • Channel Conflict Brent Driver Zach Evans
    • Executive Summary
      • What is Channel Conflict?
      • Origins of Channel Conflict
      • Identifying Channel Conflict
      • Case Studies
      • Class Activity
      • Channel Cooperation
      • Channel Competition
      • Minimizing Channel Conflict
      • Conclusions & Questions
    • Channel Conflict Is...
    • A Refresher from Chapter 11
      • Channel Conflict defined:
      When a channel member’s perceptions of roles, responsibilities, and accomplishments are not consistent with the perceptions of these facets of behavior by other channel members.
    • What Causes Channel Conflict?
      • Market Evolution
        • Increase market share
        • Reduce costs
      • E-Commerce Strategies
        • B2B opportunities
        • Direct Selling
    • Internet & Channel Conflict
      • How does the Internet affect channel conflict potential?
        • Manufacturing
        • Service
      • Customer Access
      • Delivery Economics & Logistics
    • Motivations for Direct Selling
      • Resellers carry limited selection
      • Higher margin potential
      • Take power from resellers
      • Broader selection, better ambiance, higher service
      • More flexibility with product attributes
      • Closer contact with customers
      • Protection from reseller crises
    • The Power Struggle
      • Perception of Power = Power
      • Manufacturer
      • Wholesaler/Distributor
      • Retailer
      • CONSUMER!
    • Consumer Power
      • 24 x 7 x 365
      • Prices are Transparent
      • High Degree of Personalization
      • No Physical Storefronts
      • Technology
      • ‘Mass Customization’
    • Top 10 Signs Your Company is Experiencing Excessive Channel Conflict
    • Top 10…
      • 10. Your top sales guy is now emptying your garbage can
      • 9. Your top distributor sends you an e-mail that says: “Thanks for the referral…Jerk!”
      • 8. In your last staff meeting, your presentation was titled “Boosting Profit Margins with Little Regard to Anyone Else’s Feelings”
      • 7. You just recruited a new V.P. of Customer Discord
      • 6. Everyone is dropping their middle initial from their business cards
    • Top 10…
      • 5. The President of one of your former wholesalers is sleeping on your couch
      • 4. Wal-Mart is proudly featuring your product line…in their parking lot
      • 3. You just fired half the marketing staff to boost your e-commerce budget
      • 2. You recently hosted a golf tournament for your resellers, and your final round score of 108 was good enough to win
      • 1. The two words you heard at the last board meeting: “You’re Fired!”
    • Identifying Channel Conflict
      • Departure of Sales Staff and Business Partners
      • Customer Become Aware of the Conflict
      • Gibson Guitar
    • Hewlett-Packard
      • Market-Share Shift
      • Strong Brand Presence
      • Web Site: www.hp.com
      • Channel Partner Assistance
      • Electronic Storefronts
      • Referral Option
      • Governing Board for Channel Projects
      • Still Cannot Please Everyone
    • Ingram Entertainment
      • Nation’s largest distributor of home entertainment products
      • In 2000, launched AccessIngram.com
      • Should we sell direct to consumers?
    • To Compete or NOT to Compete Game
    • Game Rules
      • Host(s) will read out-loud a series of companies and/or brands
      • Contestants will vote individually on whether or not these companies and/or brands compete with retailers by selling direct online
      • Contestant(s) with the most correct votes will be declared a winner
      • If there is a tie, host(s) will randomly pick a winner—their decision is final
    • Levi Strauss & Co.
      • Late 1990s: fashions were changing
        • Resurgence in interest in khakis
        • Due to continuing boom of ‘business casual’
      • Company launched full-service e-commerce sites for Levi and Dockers brands in November 1998
        • #1 request coming in from consumers on Dockers.com?
        • Desire for direct-to-consumer sales
    • Levi Strauss & Co.
      • Within a few months, executives declared their exclusive rights to sell Levis and Dockers online
      • Enraged large customers of company that were investing in e-commerce initiatives
      • By June 1999, company ceases all online advertising
        • Claimed that typical order of $56-$120 not high enough to pay for online ads
        • Shifted dollars into traditional advertising
    • Levi Strauss & Co.
      • November 1999 – one year after launching e-commerce web sites
      • Company announced it would stop selling brands online
      • The reason: costs of running sites were ‘unaffordable’ given their ‘competing priorities’
      • Observers believe the decision was motivated by channel conflict
    • EJ Footwear
      • Launched B2B sites with e-commerce capabilities in mid-2000
      • Launched B2C information-only sites in mid-2000
      • Launched first e-commerce enabled web site in mid-2000
    • Traditional Distribution $100 $50 $25 $12 We keep: $50 - $25 = $25 Retailer keeps: $100 - $50 = $50 Manufacturer Wholesaler Retailer Consumer
    • Direct Distribution $100 $25 $12 We keep: $100 - $25 = $75 Manufacturer Wholesaler Consumer B2C Website
    • EJ Footwear Challenges
      • Channel conflict
      • Sales growth and return on investment
      • Top management buy-in
      • Corporate culture
      • Industry trends
      • Ongoing development
    • EJ Footwear
      • Began selling direct on GeorgiaBoot.com, DurangoBoot.com, & LehighSafetyShoes.com in early 2001
      • Launched DickiesFootwear.com with e-commerce capabilities in early 2003
      • Plans to launch HummerFootwear.com and JohnDeereFootwear.com with e-commerce capabilities in late 2003 and mid 2004, respectively
    • EJ Footwear
      • Ceased B2C direct sales on DurangoBoot.com in February 2003
        • We had been an industry pioneer
        • Large wholesale accounts began complaining
        • Lack-of-understanding by sales force led to sense that ‘only the corporate office wanted this’
        • Decision was made to take a wait-and-see approach
    • EJ Footwear
      • Continued development of private catalogs for Lehigh accounts
      • Launch of co-branded web site for largest Georgia Boot customer
      • Re-launch of improved B2B tools
      • Continued development of B2C tools and applications
      • Continued development of Internet related distribution partnerships
    • Channel Cooperation
      • Manufacturer & retailer split revenues
      • Manufacturer & retailer build one brand experience through new brand or partnership
      • Manufacturer & retailer jointly manage & market to customers
      • Manufacturer & retailer share performance-based revenue
      • Manufacturer & retailer work together on merchandising & marketing plans
      • Manufacturer & retailer share aggregate customer data
      • Retailer keeps the margin and reduces costs with manufacturer merchandising & marketing help
      • Manufacturer provides support & collateral
      • Retailer provides assortment & service; promotes the brand
      • Retailer owns the customer
      Manufacturer Support Financial Implications Intangibles Customers Relationship Form
    • Channel Competition
    • Minimizing Channel Conflict
      • No prices on web site
      • Divert fulfillment of orders to retailers
      • Promotion partners online
      • Encouraging partners to advertise online
      • Offer subset of products online
      • Unique brand name online
      • Offer products early in lifecycle online
      • Effectively communicate overall distribution strategy
      • Effectively coordinate distribution strategy
      • Make use of over-reaching goals
    • Conclusions
      • Consumers readily move between distribution channels even if manufacturers and retailers are hesitant to cross borders
      • Both parties must:
        • Satisfy mutual needs
        • Reduce redundancy
        • Share costs
    • Questions?