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Conflict in Marketing Channels

Conflict in Marketing Channels

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Published by zaxr_2
Conflict in Marketing channels
Conflict in Marketing channels

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Published by: zaxr_2 on Mar 23, 2010
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11/26/2012

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Marketing Channel ConflictConflict in marketing channels, which has been the focus of numerous channel investigations,refers to goal-impeding behavior by one or more channel members. Channel conflict occurswhen manufacturers (brands) disinter mediate their channel partners, such as distributors,retailers, dealers, and sales representatives, by selling their products direct to consumers throughgeneral marketing methods and/or over the internet through eCommerce. When the behavior of achannel member is in opposition to its counterpart channel conflict arises. When one channelmember takes actions that another channel participant believes will reduce its ability to achieveits objectives, conflict is present. As conflict can have an adverse effect on channel member  performance, channel managers must make conscious efforts to detect and resolve it.
Identifying Channel Conflict
One thing that managers must face is that conflict will always exist to some degree. To eliminateit totally would diminish business opportunities. In other words, in order for a company to growtheir business, there must be some conflict. The key is recognizing when it becomescounterproductive. An obvious sign that your company has taken a misstep is when sales staff and business partners begin leaving. Another less identifiable sign is when the customer actually becomes aware of the conflict. “The bottom line for a company is how to manage the customer relationships with its production strategies,” (McDonald 1999). We can consider the GibsonGuitar Company. In 1997, they learned about channel conflict the hard way by offering their guitars for sale on their website at 10 percent below list price. Dealers became irate, and thecompany ended the online sales effort after only a month. They listened hard to the complaintsfrom their network of dealers and decided to compromise. Now, instead of selling guitars online,they only offer strings and other accessories. They have also added their parts catalog to the web1
 
site to sell items that were previously available only to dealers and repair shops, which is anexcellent way to meet those customers’ needs. Walter Carter, the web site manager for Gibson,felt that their biggest mistake was failing to inform the dealers that they were planning to selltheir guitars online (Kalin 1998).
Types of channel conflicts are:
a. Goal Conflict: conflict that stems from differences between channel members’ goals andobjectives. b. Domain Conflict: conflict that arises due to the disagreement over the domain of action andresponsibility.c. Perceptual Conflict: a conflict that arises due to the perceptual difference in regard to themarket place..
Best Practices for Minimizing and Managing Channel Conflict
Channel conflict is often thought of as dysfunctional and, therefore, unwanted. Conflict can,however, be healthy and desirable in certain situations. Conflict can serve to keep channelmembers from becoming too passive or lacking in creativity. This same conflict can alsomotivate members to adapt, grow, and seize new opportunities. From the manufacturer’s perspective, multi-channel distribution strategies can be beneficial in a number of ways. First, itdoes allow the manufacturer to gain much-needed insight into end-consumer’s needs andshopping patterns. Second, manufacturers with “broad product lines can benefit because it isunlikely that a single channel type will be optimal for all products.” Third, excess manufacturingcapacity can be better utilized with additional outlets when existing channels are over-supplied.Finally, manufacturers with a multi-channel distribution strategy can focus more on preciselytargeting markets and improving their overall competitiveness (Webb 2002). According to a2
 
2000 study performed by Forrester Research, 75 percent of online consumers are likely to visit amanufacturer’s web site when researching a product to buy. Online consumers are empoweredwith information and are not hesitant to move on to a competitor’s product offering if they do notfind the information and options they are looking for. Manufacturers and their channel partnersmust deepen their relationships and cooperation—when the manufacture chooses not to competedirectly—to service and satisfy empowered consumers by sharing. These new types of relationships may take one of three forms (Matta, Mehta 2001):
Relationship FormCustomersIntangiblesFinancialImplicationsManufacturerSupport
· Retailer owns thecustomer relationship· Manufacturer  provides supportand collateral· Retailer providesassortment andservice; promotesthe brand· Retailer keeps themargin andreduces costswith manufacturer merchandisingand marketinghelp
Collaboration
· Manufacturer andretailer shareaggregatecustomer data· Manufacturer andretailer work together onmerchandisingand marketing plans· Manufacturer andretailer share performance basedrevenue
Seamlessness
· Manufacturer andretailer jointlymanage andmarket tocustomersManufacturer and
retailer build one brand experiencethrough new brand or  partnership· Manufacturer andretailer splitrevenuesIt is not surprising that minimizing channel conflict is at the center of many companies’ Internetstrategies. Proper analysis and appropriate strategies can go far toward managing the degree thatconflict channel members must overcome. 
Conflict Resolution Strategies:
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