Channels of Distribution Management

Behavioral Processes in
Marketing Channels
Marketing Channels are not just economic
systems

Marketing Channels are also Social
Systems

Therefore, the same behavioral processes
existing in all Social systems also exist in
Marketing Channels
Behavioral Processes in
Marketing Channels

The behavioral processes of most relevance to
marketing channels are:

Conflict

Power

Channel co-ordination
Conflict Defined
When one Party perceives the
behavior of another party in the
social system to be impeding
the attainment of its goals, a
state of conflict exists.
Conflict Compared to
Competition
Competition
Object centered
Indirect
Impersonal
Conflict Competition
Conflict > Competition
Conflict
Direct
Personal
Opponent centered
Channel Conflicts
Conflict is generated when actions of any
channel member come in the way of the system
achieving its objectives
Three broad categories of channel conflict are:
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
Channel Conflict
CONFLICT
DOMAIN PERCEPTION GOAL
Effects of Channel Conflict
No Effect
Negative Effect

Positive Effect
Multiple Effects Over Different Ranges

Impact of conflict on channel
efficiency
Channel
efficiency
Conflict level
0 C
1
C
2
Neutral
Positive Negative
Effects of negative conflict
Low cooperation
Poor communication
Inefficiencies
Poor performance
Reduced competitiveness
Four Stages
LATENT
MANIFEST
FELT
PERCEIVED
Each stage is progressively more severe than the earlier one
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

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 behaviour of channel
partners. Confrontation results.
Initiatives taken are openly opposed affecting the
performance of the channel system.
May require outside intervention to resolve

Reasons for Channel Conflict
Roles not defined properly
Allocation of scarce resources between members
seem unfair to some
Differences in perception of the business
environment
Future expectations not likely to materialize
Decision domain disagreements who has to
decide on what (key account pricing)
Channel members do not agree on objectives
Misunderstanding or mis-interpretation of routine
business communication

Causes of Channel Conflict
Role Incongruities/ ambiguity
Resource Scarcities
Perceptual Differences
Expectational Differences
Decision Damping Disagreements
Goal Incompatibilities
Communicational Difficulties

Resolving Conflicts
Understanding nature and intensity

Strategy and plan of action for resolution


Understand the impact of the conflict


Tracing the source of the conflict

A 4 Stage Process
Conflict Resolution Styles
Avoidance
Aggression
Accommodation
Compromise
Collaboration
Least effort and
results
Maximum effort and
Best results
Kenneth W Thomas
Styles are a combination
of assertiveness and
co-operation.
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.
Aggression
Also known as a competitive or selfish style.
It means being concerned about ones 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.
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
Compromise
Obviously both sides have to give up
something to meet mid way.
Can only work with small and not so
serious conflicts.
Used often in the earlier two stages.
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
Managing conflict
Early detection
survey of channel members
perceptions
marketing channel audit
advisory councils or committees
Appraise effects of conflict
frequency, intensity and importance of
disputes
Resolve dysfunctional conflict
Conflict zones
frequent
Medium
zone
occasional
major
high
medium
minor
frequency
intensity
importance
low
infrequent
occasional
minor
Low
zone
High
zone
Managing Channel Conflict (I)
Conflict is inherent in marketing channels
Many causes: so conflict is pervasive
Conflict can affect channel efficiency

First of all must
recognize that:
Power in Marketing
Channels
Power Defined:
The capacity of one channel member to
get another channel member to do
something that he otherwise would not
have done.
Bases of Power for
Channel Control
1st
Place
Reward Power

Coercive Power

Legitimate Power

Referent Power

Expert Power

Using Power in Marketing
Channels
Identifying available power bases


What buttons are available and which ones
should be pushed
Selecting and using appropriate bases
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
Channel Co-ordination
Channel system is well co-ordinated if each
member understands his role correctly and
performs it to help the system achieve its
customer service objectives.
In a co-ordinated 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
Channel co-ordination is an on-going effort