Date post: | 03-Nov-2014 |
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Education |
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Marketing ChannelsMarketing ChannelsChapter 7Chapter 7
Managing Conflict to Managing Conflict to Increase Channel Increase Channel
CoordinationCoordination
OutlinesOutlines
• 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
What is channel What is channel conflict?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.
Level of conflictLevel of conflict• Latent conflict• Perceived conflict• Felt or affective conflict• Manifest conflict
Measuring ConflictMeasuring Conflict• Measuring conflict is a Four steps process1. Issues2. Importance3. Frequency of disagreement4. Intensity of dispute
N
i=1
Conflict = ∑Importancei x Frequencyi x Intensityi
Damage to the Damage to the ChannelChannel
• High levels of manifest conflict damage long-term relationships in the channel
• Conflict leads too Decreased economic satisfactiono Decreased non-economic satisfactiono Loss of trusto Reduced commitmento Coalitions
Sources of ConflictSources of Conflict• Goal conflictAgency theory underscores how competing goals
create conflict in principal-agent relationship.
Manufacturer (Nike) Retailer (Foot Locker)Higher margin for self Higher margin for selfHigher price to reseller Lower price to resellerLower price to end-user Higher price to end-userReseller holding more
inventoryReseller holding less
inventoryNo allowances More allowances
Increase unit sales Increase unit sales
Sources of ConflictSources of Conflict• Perceptual conflictDiffering perceptions at even very basic levelsInaccurate expectations of actions of the otherDifferent focus
Manufacturer Channel memberown processes and
productown processes and
customersLack of communication
Different cultures
Sources of ConflictSources of Conflict• Domain conflictOccurs 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
Sources of ConflictSources of Conflict• Multiple channels
o Now very common• Heightened competition• Fragmented markets• Technology allows management of more channels
o Suppliers like multiple channelso Customers like multiple channelso Resellers don’t like multiple channels
• Free-riding• Customers do not stay within their intended
channels
Gray MarketsGray MarketsSelling authorized goods through an unauthorized channelOccur when:•Differential pricing to different channel members•Pricing differently to different geographic marketsEffects•Manufacturer cannot effectively sell at different prices in different markets•Erodes potential volume for authorized dealers who may also provide after-sales service
Gray MarketsGray 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
Conflict Resolution Conflict Resolution StrategiesStrategies
• Institutional mechanisms to contain conflicto Information-intensive mechanismso Share informationo Joint membership in trade associations
• Co-optationo Personnel exchangeo Third-party mechanisms
• Mediation
Conflict Resolution Conflict Resolution StrategiesStrategies
• Institutional mechanisms to contain conflicto Building relational norms
• Flexibility• Information exchange• Solidarity
Conflict Resolution StylesConflict Resolution Styles
Compromise
Collaboration or Problem Solving
Competition or Aggression
Avoidance
Accommodation
Conflict Resolution Via Conflict Resolution Via
IncentivesIncentives• Economic incentives
o Effectiveo The package of factors that collectively create
financial returns for the channel member