This document discusses managing conflict in marketing channels. It defines channel conflict as opposition between channel members due to separate goals and limited resources. Some conflict is normal and can be productive by improving communication and strategy development. However, high conflict damages channel performance. Sources of conflict include competing goals, differing perceptions of reality, clashes over domains or responsibilities, and intra-channel competition from multiple channels or gray markets. Managing conflict requires understanding its nature, importance, and frequency, then addressing issues through communication, coordination, and segmentation to distinguish channel members.

1. Channels Management
By
Tauseef Iqbal Khan

2. Reference Books
• Marketing Channels (7th Edition), Anne Coughlan (Author), Erin
Anderson (Author), Louis W. Stern (Author), Adel El-Ansary
• Marketing Channel Management: People, Products, Programs, and
Markets, Russell W. McCauley, (Latest Edition)
• Marketing 4.0 by Kotler
• HBR Articles

3. Chapter 7 Managing Conflict To Increase
Channel Coordination
Learning Objectives
• Distinguish circumstances where conflict is not negative and , is
neutral or even positive
• Understand how to diagnose conflict in terms of issues, frequencies,
intensity and importance
• Understand why multiple channels have become norm and describe
the ways to address the conflicts they create
• Describe the ways to close conflicts

4. Assessing The Degree And Nature Of Channel
Conflict
• Channel conflict is a state of opposition or discord among the
organizations comprising a marketing channel
• Is a normal state of channel
• Certain amount of conflict is desirable for maximizing performance

5. What Is Channel Conflict
• The word Conflict derived from Latin Configere means to collide
• A negative connotation, viewed something to avoid, as a sign of
trouble
• Channel Conflict is behavior by a channel member that is in opposition
to its channel counterpart
• Occurs when one member of a channel views its upstream or
downstream as an adversary – The Key is interdependency at
different levels of the same channel attempt to block each other

6. What Is Channel Conflict
• Conflict implies an incompatibility at some level
• Conflict frequently exists at such low level which is not sensed by
channel member (Latent Conflict) is the norm in market
• Interests of all parties collide due to separate goals, autonomy and
limited resources
• Latent Conflict exists when the conditions are right for the contention
but members are unaware of this or Perception is missing

7. What Is Channel Conflict
• Perceived Conflict occurs when a channel member senses that
opposition of some sort exists. It is cognitive means emotionless and
mental. Examples Manufacturer and Distributor perceive they are in
disagreements but their members experience little emotion (Consider
as Business Norm)
• When emotions (Affect) enter, channel experiences felt conflict or
affective conflict and members consider their channel conflictual.
Organizational members begin to personalize their differences

8. What Is Channel Conflict
• If not managed, felt conflict escalates quickly to Manifest Conflict and
the opposition is visible. Blocking each others initiatives and
withdrawing supports
“all looks yellow to the jaundiced eye”
V/S
“Positive history creates a positive future”

9. Measuring Conflict
The best way to gather four kinds of information
Step 1: Counting Up The Issues
• Count the major issues between the two parties
Step 2: Importance
• Ascertain how important the issue is to the party
Step 3: Frequency Of Disagreement
• Find judgmentally or by collecting data , how often the two parties
disagree over each particular issue

10. Measuring Conflict
Step 4: Intensity Of Dispute
Conflict = ∑ Importance*Frequency*Intensity
• Inflamed relationships lead people to double count issues, to
overlook issues on which they agree and to exaggerate the intensity
of their differences

11. The Consequences Of Conflict
When Conflict Is Desirable
• Conflict is usually thought to be dysfunctional
• Opposite to this are the occasions which make relationships better
and this is called Functional Conflict
• Is common when channel members recognize each other’s
contribution and understand that each party’s success depends on
other. In these channels, the parties can oppose each other without
damaging their arrangement

12. The Consequences Of Conflict
• Their disagreements actually lead to effective communication, strong
combined strategy development, balanced power relations
• Are peaceful channels better channels ? To see why conflict is so low
– if the parties are indifferent. Consider when a distributor has too
many principles

13. How Intense Conflict Damages Channel
Performance & Coordination
• High level of manifest conflict affects organization’s satisfaction in a
manner that damages channel’s long-term ability to function as a
close partnership
• As conflict increases, the firm will drive less from the channel. Loss in
financial as well as decline of psychological and social relationship
• Conflict is costly and carries cost therefor it should be managed rather
avoiding

15. Major Sources Of Conflict In Marketing
Channels- Competing Goals
• Each channel members have a set of goals and objectives different
from those of other channel member
• This built-in difference in what firms seek to achieve is fundamental
to all business
• Often channel members personalize their conflicts and believe that a
change of partner or personnel will solve their problems But Not the
case
• Misperception fuels conflict. Example is the relationship between the
supplier and the reseller

16. Differing Perceptions of Reality
• An important source of conflict because they indicate that there will
be differing bases of action in response to the same situation
• Perceptions may differ on The Attributes of the product, The
Application it serves and The Competition
• Channel members have very inaccurate expectations of what the
other will do. These expectations lead them to choose suboptimal
strategies that heightens the conflict
• The reason is the lack of focus / the lack of communication

17. Differing Perceptions of Reality
• One study on US Suppliers and Mexicans Distributor reveals that
difference in culture creates conflict due to difference in perception
and interpretation (Rural Distribution in Pakistan)
• The solution is twofold. One is Communication (overcoming Language
barrier / candid communication)
• The second is for each organization to build greater sensitivity to the
business culture of the other. Focus on respect, acceptance of other’s
norm and belief

18. Clashes Over Domains
• Each channel member has its own domain
• Conflict occurs when one member perceives that order is not taking
proper care of responsibilities in its domain. Who should do what /
How should be done-
• Pre-sale and Post sale services, warranties claims (Conflict between
supplier and dealers)

19. Clash Of Market Domains
Intra-channel Competition
• Channel Members are potentially competing each other for the same
business
• From the upstream viewpoint, the domain clash occurs when supplier
sees its downstream partners representing its competitors (Cost to
limit distributors)
• From the downstream perspective, domain clash occurs when a
supplier sells through dual channel or multi-channel (Intensive
distribution)
• Another source of domain clash is when multiple types of channels
represent the supplier’s product to the same geographical market

20. Multiple Channels- No Longer Unusual
• Many companies used one primary route to market (other routes
were secondary and often downplayed to avert conflict)
• Now multi-channel is the norm because of augmented competition
and , fragmented markets make harder for one channel to serve the
large audience – Technological advancements made easy
• Meaningful for the supplier and the customers to have multiple
channels; however, suppliers often fail to anticipate that multichannel
can reduce channel motivation
• SO SEGMENTATION schemes must consider the nature of purchase
and just not nature of buyer

21. Kinds Of Markets Support Dual Channel
• Growing markets which tend to offer opportunity for many
• Markets in which the customers perceive the product category as
differentiated ( Channel members to room to distinguish their
offerings through bundling or)
• Markets in which buyer have a consistent purchase style
• Markets that are not dominated by buying groups

22. Multiple Channels- A Reality or A Problem
• Multiple channels don’t always compete (Case of a dispute between
retailer and Coca-Cola in Japan after installation of vending machine)
• Multiple channel can help in building primary demand for the product
category like a combination of Store and Catalog-web sale
• However, electronic commerce to emerge as a potential for free-
riding
• The advantages are obviously to the suppliers as geographical
coverage increases

23. Multiple Channels- What Suppliers Can Do
• Issue is what responsibility suppliers have to protect their multiple
channels from each other
• No Action Or
• Can offer more product, more services and even differentiated to different
channels to ensure that members are distinguished. Example reserving the
higher-end models for one channel and the rest of the line for others
• One more way is to offer the same product to different members under
different brand name. Common Strategy in Automobiles and Appliances
• A variation to the theme is to sell primary or flagship of the product
through one channel (Independent Channel) while the peripheral through
captive channels. More frequent in Telecom sectors – Vendor and Sub-Con
concepts, IT industries where major products and minor products are sold
through different channel

24. Gray Markets
• Gray Marketing is the sale of authorized, branded product through
unauthorized distribution channels- Discount outlets that provide less
customer service than the authorized channels do
• Contrast with the Black Marketing, counterfeiting which involves
selling fake goods as branded ones

25. Gray Markets- Who Is Supplying these
Unauthorized Channels
• Authorized dealers and distributors often in other markets
• Professional Arbitragers (Import / Export houses; Individuals or
professional who buy in bulk at retail when price is low and transport
where prices are high- Usually living near ports or borders)
• And the Ultimate Source is “ Supplier itself” through home office or
foreign divisions

26. Gray Markets- Reasons For Developing
• Differential pricing to channel members, one channel member purchases at
higher discount and lodge to other channel members
• Another factor is the practice of pricing differently to different geographical
markets
• One reason is domestic products are sold though high-service high price
channels at home provide an opportunity to introduce gray marketed
goods through discounters
• Manufacturers complain that grey market impair their ability to charge
different prices in different market, the service levels provided by gray
market are lower than that of the authorized one hence suffers the brand
equity
• Also challenges the post-sale service. Like Electronic Items

27. Gray Markets- Challenges
• Not easy to block as violations are difficult to detect, when there is no free-
ride available , when the product is mature and even when the violator
does not carry competitor’s goods
• For a mature product, suppliers prefer to have gray channel for intensive
coverage, can put pressure on reseller to ensure availability keeping price-
sensitive
• More often, gray market serves price-sensitive customers so as to the
supplier to cater those segment through Gray Channels
• However, remains a source of Conflict between the Suppliers and the
distributors. Suppliers do bemoan them in public but encourage them in
private

28. Fueling Conflict
• Channel conflict should be managed to make sure it remains primarily
functional conflict
• Conflict begets more conflict. A major reason of conflict proliferation
is the past actions. Each party discounts other positive’s behavior
• Threats / punishments/sanctions fuel the conflict. It provokes
retialation

29. Industrial Marketing Channels In Developed
Economies
• B2B channel in developed economies are good example of balanced
power. Much of the conflict is latent and does not manifest actions
• The parties remain self-restraint. The best way to gain power is to
perform one’s role in the very best manner.
• These members rely on persuasions and communication

30. Conflict Resolution Strategies
• Two approaches. One is to try to keep conflict from escalating into the
dysfunctional zone. This is done by institutionalized mechanism such
as arbitrations
• The other is to use patterns of behavior to try to resolve conflicts

31. Resolving Conflict- Institutionalized
Mechanism
• Channel members develop policies to address conflicts in early stages
even before it arises
• These policies become institutionalized (part of the environment of
relationship)
• One way is to create mechanism of information sharing. Some
channels use exchange of persons as an institutional vehicle to run
the channel members to devising solution rather engaging in conflicts
• Co-optation is used as a mechanism to add new elements into the
leadership

32. Third-Party Mechanism
• By involving a non-channel member (third party), members can enter
into mediation or arbitration
• Sequencing is another way to conflict resolution. Some firms practice
mediations-arbitration usually the same person performs mediation
and arbitration
• Or Use Arbitration-Mediation. A decision is kept sealed in an
envelope. Parties are asked to enter into mediations if disagree then
the envelop is opened and decision is applied

33. Building Relational Norms
• Norms that how channel members manage their relationship. Grows
over time. A channel’s norm are its expectations about behavior such
as Flexibility, Solidarity and Information exchange

34. Style Of Conflict Resolution
Accommodation
i. Meaning to be more focused on other's
goal than one’s own
ii. More pro-active approach
iii. Way of keeping the peace
iv. But exposes accommodator to
exploitation if the other party does not
reciprocate
High Cooperativeness
I. Pressing each side to achieve each side
goals
II. Centrist approach
III. Often suitable in handling minor conflicts
Low Assertiveness
I. Passive approach with poor negotiation
skills
II. The idea is to avoid conflict
III. Less information exchange
Low Cooperativeness
I. Strategy of Competition using Zero-Sum
game
II. Focus on pursuing owns goal while
ignoring other
III. Need revamping all the time for long term
relationship

35. Resolving Conflict And Achieving Coordination
Via Incentive
• Field evidence suggests that economic incentives work extremely well
regardless of personalities ; to settle a dispute
• However, difficult to administrator while dealing with multichannel
• One effective is to use PRM (Partner relationship management) like
CRM