Marketing Channels- Managing Conflict to Increase Channel Coordination


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Marketing Channels- Managing Conflict to Increase Channel Coordination

  1. 1. Marketing Channels Chapter 7 Managing Conflict to Increase Channel Coordination
  2. 2. Outlines <ul><li>What is channel conflict? </li></ul><ul><li>Measuring conflict </li></ul><ul><li>Damage to the channel </li></ul><ul><li>Source of conflict </li></ul><ul><li>Gray markets </li></ul><ul><li>Fueling conflict </li></ul><ul><li>Conflict Resolution Strategies </li></ul><ul><li>Institutionalized Mechanisms to Contain Conflict </li></ul><ul><li>Conflict Resolution Via Incentives </li></ul>
  3. 3. What is channel conflict? <ul><li>Channel conflict is behavior by a channel member that is in opposition to its channel counterpart. </li></ul><ul><li>It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart. </li></ul>
  4. 4. Level of conflict <ul><li>Latent conflict </li></ul><ul><li>Perceived conflict </li></ul><ul><li>Felt or affective conflict </li></ul><ul><li>Manifest conflict </li></ul>
  5. 5. Measuring Conflict <ul><li>Measuring conflict is a Four steps process </li></ul><ul><li>Issues </li></ul><ul><li>Importance </li></ul><ul><li>Frequency of disagreement </li></ul><ul><li>Intensity of dispute </li></ul>Conflict = ∑ Importance i x Frequency i x Intensity i N i = 1
  6. 6. Damage to the Channel <ul><li>High levels of manifest conflict damage long-term relationships in the channel </li></ul><ul><li>Conflict leads to </li></ul><ul><ul><li>Decreased economic satisfaction </li></ul></ul><ul><ul><li>Decreased non-economic satisfaction </li></ul></ul><ul><ul><li>Loss of trust </li></ul></ul><ul><ul><li>Reduced commitment </li></ul></ul><ul><ul><li>Coalitions </li></ul></ul>
  7. 7. Sources of Conflict <ul><li>Goal conflict </li></ul><ul><li>Perceptual conflict </li></ul><ul><li>Domain conflict </li></ul>
  8. 8. Sources of Conflict <ul><li>Goal conflict </li></ul><ul><li>Agency theory underscores how competing goals create conflict in principal-agent relationship. </li></ul>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. 9. Sources of Conflict <ul><li>Perceptual conflict </li></ul><ul><li>Differing perceptions at even very basic levels </li></ul><ul><li>Inaccurate expectations of actions of the other </li></ul><ul><li>Different focus </li></ul>Manufacturer Channel member own processes and product own processes and customers Lack of communication Different cultures
  10. 10. Sources of Conflict <ul><li>Domain conflict </li></ul><ul><li>Occurs when one channel member perceives that the other is not taking proper care of its responsibilities. </li></ul>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. 11. Sources of Conflict <ul><li>Multiple channels </li></ul><ul><ul><li>Now very common </li></ul></ul><ul><ul><ul><li>Heightened competition </li></ul></ul></ul><ul><ul><ul><li>Fragmented markets </li></ul></ul></ul><ul><ul><ul><li>Technology allows management of more channels </li></ul></ul></ul><ul><ul><li>Suppliers like multiple channels </li></ul></ul><ul><ul><li>Customers like multiple channels </li></ul></ul><ul><ul><li>Resellers don’t like multiple channels </li></ul></ul><ul><ul><ul><li>Free-riding </li></ul></ul></ul><ul><ul><ul><li>Customers do not stay within their intended channels </li></ul></ul></ul>
  12. 12. Gray Markets <ul><li>Selling authorized goods through an unauthorized channel </li></ul><ul><li>Occur when: </li></ul><ul><li>Differential pricing to different channel members </li></ul><ul><li>Pricing differently to different geographic markets </li></ul><ul><li>Effects </li></ul><ul><li>Manufacturer cannot effectively sell at different prices in different markets </li></ul><ul><li>Erodes potential volume for authorized dealers who may also provide after-sales service </li></ul>
  13. 13. Gray Markets <ul><li>Growing quickly </li></ul><ul><li>Often tolerated </li></ul><ul><li>Violations difficult to detect </li></ul><ul><li>Gray markets sometimes give more category exclusivity </li></ul><ul><li>Costs of taking action against gray markets often more than the benefits </li></ul><ul><li>Manufacturer gets greater market coverage </li></ul><ul><li>May be an intended channel </li></ul>
  14. 14. Fueling Conflict <ul><li>Conflict creates more conflict </li></ul><ul><li>Bad history </li></ul><ul><li>Threats </li></ul>
  15. 15. Conflict Resolution Strategies <ul><li>Institutional mechanisms to contain conflict </li></ul><ul><ul><li>Information-intensive mechanisms </li></ul></ul><ul><ul><li>Share information </li></ul></ul><ul><ul><li>Joint membership in trade associations </li></ul></ul><ul><ul><ul><li>Co-optation </li></ul></ul></ul><ul><ul><li>Personnel exchange </li></ul></ul><ul><ul><li>Third-party mechanisms </li></ul></ul><ul><ul><ul><li>Mediation </li></ul></ul></ul>
  16. 16. Conflict Resolution Strategies <ul><li>Institutional mechanisms to contain conflict </li></ul><ul><ul><li>Building relational norms </li></ul></ul><ul><ul><ul><li>Flexibility </li></ul></ul></ul><ul><ul><ul><li>Information exchange </li></ul></ul></ul><ul><ul><ul><li>Solidarity </li></ul></ul></ul>
  17. 17. Conflict Resolution Styles Compromise Collaboration or Problem Solving Competition or Aggression Avoidance Accommodation
  18. 18. Conflict Resolution Via Incentives <ul><li>Economic incentives </li></ul><ul><ul><li>Effective </li></ul></ul><ul><ul><li>The package of factors that collectively create financial returns for the channel member </li></ul></ul>
  19. 19. Q&A