Channel Management

Session-24

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Channel Management

• Is in three broad phases:

• Use of power bases

• Identifying and resolving channel conflicts

• Channel co-ordination

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Use of Power Bases
• Channel system has a set of players:
• Not equally motivated to implement the ideal channel design
• Whose expectations from the system differ

• Use of the 5 power bases brings diverse channel partners in line for
effective implementation
• 5 power bases are: reward, coercion, legitimate, expert and referent (French &
Raven)
• Two more power bases in the Indian context are support and competition

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 French & Raven

“Power” of Motivation
• Reward – incentives for good performance
• Coercion – threat of punishment for non-performance
• Referent – benefit of sheer association with a strong company
• Legitimate – arising out of a contract
• Expert – specialized knowledge
• Support – additional benefits for better performers only
• Competition – created between channel partners

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Countervailing Power
• Balances the power exerted by one channel member. It is not a one-sided
equation.

• Both the channel member and the principal can have influence on each other.

• Results from interdependence within the channel system.

• Company exerts power on the distributor to get its coverage and revenues
• Distributor has enough influence on his customers and this is critical for the company also
• Weaker partners do get exploited – ancillary units

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 Channel Co-ordination

Channel co-ordination is an on-going effort

In a coordinated channel:
• Interests of all channel members are protected
• Actions of all are in line with overall objectives
• Flows are streamlined to desired customer service
objectives
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Channel Conflicts

• Conflict is generated when actions of any channel member come in

the way of the system achieving its objectives

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 Channel Conflict

• Situation of discord or disagreement between partners in the same

channel system

• If any member feels that another is working in a manner as to affect

him, conflict results

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Channel Conflict

CONFLICT

GOAL DOMAIN PERCEPTION

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Goal conflict – understanding of
objectives by various channel
members is different
Domain conflict – understand
responsibilities and authority
differently

Perception conflict – reading of the

market place is different and
proposed actions vary

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Conflicts Result From…
Each channel member wanting to
pursue his own goals
Each wants to retain his
independence
There are limited resources which
all of them want to utilise in
achieving their goals
• Initially latent and does not affect the
working
Features of conflicts: • Is not normally possible to detect till it
becomes disruptive

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Four Stages

Each stage is progressively more severe than the earlier one

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Types of Conflicts
Latent Conflict:
• Some amount of discord exists
but does not affect the working
or delivery of customer service
objectives.
• Disagreement could be on roles,
expectations, perceptions,
communication.
Perceived Conflict:
• Discords become noticeable –
channel partners are aware of
the opposition.
• Channel members take the
situation in their stride and go
about their normal business
• No cause for worry but the
opposition has to be recognized
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Types of Conflicts
Felt Conflict:
• Reaching the stage of worry,
concern and alarm. Also known as
‘affective’ conflict.
• Parties are trying to outsmart each
other.
• Causes could be economical or
personal
• Needs to be managed effectively
and not allowed to escalate.
Manifest Conflict:
• Reflects open antagonistic
behavior of channel partners.
Confrontation results.
• Initiatives taken are openly
opposed affecting the performance
of the channel system.
• May require outside intervention
to resolve
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Channel Conflict Types
Type of conflict Briefly explained

Hybrid channels Producers and channel partners selling to the

same customers

Horizontal Between channel partners at the same level.

Distributors straying into each other’s territory.

Vertical Between channel partners at two different levels.

A C&FA dispatches goods not ordered by the
distributor in order to make up a truck load.

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Channel Conflicts – Hybrid Channels

• Higher credit period for key accounts than company permitted to

distributors

• More favorable delivery terms to key accounts affecting distribution costs

of channel partner

• Direct sales prices lower than for the rest of the customers

• Company sales people complete sales – distributor used only for delivery

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Resolving Conflicts
A 4 Stage Process
Understanding nature and intensity

Tracing the source of the conflict

Understand the impact of the conflict

Strategy and plan of action for resolution

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Conflict Resolution Styles
Avoidance Styles are a combination
of assertiveness and
Aggression co-operation.

Accommodation

Compromise

Collaboration

Least effort and Maximum effort and

results Best results

Kenneth W Thomas 18
Avoidance

Used by weak channel members.

Problem is postponed or discussion avoided.

Relationships are not of much importance.

As there is no serious effort on getting anything done,

conflict is avoided.

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 Aggression

Also known as a competitive or selfish style.

It means being concerned about one’s own goals without

any thought for the others.

The dominating channel partner (may be the principal)

dictates terms to the others. Long term could be
detrimental to the system.
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 Accommodation

A situation of complete surrender.

One party helps the other achieve its goals without being worried about its
own goals.

Emphasis is on full co-operation and flexibility in approach. May generate

matching feelings in the receiver.

If not handled properly, can result in exploitation

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 Compromise
Obviously both sides
have to give up
something to meet Used often in the
mid way. earlier two stages.

Can only work with

small and not so
serious conflicts.

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Collaboration
Also known as a problem solving approach

Tries to maximize the benefit to both parties while solving the dispute.

Most ideal style of conflict resolution – a win-win approach

Requires a lot of time and effort to succeed.

Sensitive information may have to be shared

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