Behavioral Process in

Marketing Channels
Marketing Channel – a Social System

• A social system can be defined as :

– “The system generated by any process of interaction on

the sociocultural level, between two or more actors. The
actor is either an individual or a collectivity”.
Marketing Channel – a Social System

• Fundamental behavioral dimensions present in all

social systems :

– Conflict
– Power
– Role
– Communication Process
Conflict in Marketing Channel

“Conflict exists when a member of the

marketing channel perceives that another
member’s actions impede the attainment of
his or her goals.”
 Conflict vs Competition

Conflict Competition

Is direct, personal and Is behaviour that is object-

opponent-centered centered, indirect and
behaviour impersonal
Causes of Channel Conflict

• Role Incongruities
• Resource Scarcities
• Perpetual Differences
• Expectational Differences
• Decision Domain Disagreements
• Goal Incompatibilities
• Communication Difficulties
 Major Sources of Conflict

• Goals

• Perceptions of reality

• Domain
 Competing Goals

Suppliers’ Goal Retailers’ Goal

- Retailers should accept lower - Achieve higher gross margin

Gross margins - Less inventory
- Hold down expenses
- Hold More Inventory
- Receive higher allowance
- Spend more
- Less allowance
 Natural Sources of Conflict

Supplier Viewpoint Reseller Viewpoint Expression of Clash

Financial Maximise own profit by Maximise own profit by Supplier: You don’t put
Goals -Higher prices -Higher own level margins enough effort behind
-Higher sales -Lower expenses my brand. Your prices
are too high.
-Higher expenses -Faster inventory turnover
-Higher inventory -Higher allowances
Reseller : You don’t
-Lower allowances support me enough.
With your wholesale
prices, we can’t make
money
 Natural Sources of Conflict

Focus on : Focus on :

Supplier Viewpoint Reseller Viewpoint Expression of Clash

Desired •Multiple segments •Segment corresponding to Supplier: We need

Target •Multiple markets resellers’ positioning (e.g., more coverage and
Accounts •Many accounts (raise discounter) more efforts. Our
•Our markets only reseller doesn’t do
volume and share)
•Selected accounts (those enough for us
that are profitable to serve)
Reseller : You don’t
respect our marketing
strategy. We need to
make money too.
 Natural Sources of Conflict

Focus on : Focus on :

Supplier Viewpoint Reseller Viewpoint Expression of Clash

Desired •Concentrate on our •Achieve economies of Supplier: You carry too

product product category and scope over product many lines. You don’t
and our brand categories give us enough attention.
accounts •Carry out full line (a •Serve customers by You’re disloyal.
policy variation for every offering brand assortment
conceivable need, plus •Do not carry inferior or Reseller : Our customers
our efforts to expand slow-moving items (every come first. If we satisfy
our line outside our supplier has some of our customers, you will
traditional strengths) these) benefit. By the way,
shouldn’t you consider
pruning your product
line?
 Differing Perceptions of Reality

• Problems :

– Focus
– Lack of Communication
– Culturally divergent ides

• Solutions :

– Detailed communication
– Develop greater sensitivity to other’s business culture
 Clashes Over Domains

• Each channel member has its own domains,

or spheres of function. Much conflict in
channels occurs when one channel member
perceives that the other is not taking proper
care of its responsibilities in its appropriate
domain. This can mean doing the job wrong,
not doing the job at all, or trying to do the other
channel member’s job.
 Channel Efficiency

• Channel Efficiency is :

– The degree to which the total investment in the

various inputs necessary to achieve a given
distribution objective can be optimized in terms
of outputs.
 Conflict and Channel Efficiency
Negative Effect

Negative Effect – Reduced Efficiency

Channel
Efficiency

0
Conflict Level
 Conflict and Channel Efficiency
No Effect

No Effect – Efficiency Remains Constant

Channel
Efficiency

0
Conflict Level
 Conflict and Channel Efficiency
Positive Effect

Positive Effect – Increased Efficiency

Channel
Efficiency

0
Conflict Level
 Consequences of Positive Conflict

• Frequent and effective communication

• Establish outlets for expressing grievances

• Critically review past actions

• Devise and implement more equitable split of system resources

• Develop a more balanced distribution of power in relationship

• Develop standard ways to deal with future conflict and keep it

within bounds
 Conflict and Channel Efficiency
General Curve

Channel
Efficiency

0
C1 C2 Conflict Level
 Managing Channel Conflict
• Detect conflict or potential conflict

– Marketing Channel audit

– Distributors’ advisory Councils or Channel Member
Committees

• Appraise the possible effect of conflict

 Managing Channel Conflict

• Resolve channel conflict

– Channelwise committee
– Joint Goal Setting
– Distribution Executive
 Resolve Conflict by Arbitration
• Advantages :

– It is fast
– Preserves Secrecy
– Less Expensive than litigation
– Initial stage confrontation when easy to resolve
– Takes place before industry experts
Power in Marketing Channel
 Power in Marketing Channel

• Definition

– Capacity of a particular channel member to

control or influence the behaviour of another
channel member
Bases of Power for Channel Control

• Reward Power
• Coercive Power
• Legitimate Power
• Referent Power
• Expert Power
Using Power in Marketing Channel

• Identifying the available power bases

• Selecting and using appropriate power

bases
Role in Marketing Channel

A set of prescriptions defining what

the behavior of a position member
should be
Communication Process in Marketing
Channel

• Behavioural problems in Channel

Communications

– Differing Goals
– Language differences
Communication Process in Marketing
Channel

• Behavioural problems in Channel

Communications

– Others
• Perpetual difference among channel members
• Secretive behaviour
• Inadequate frequency of communication