Part 1: Marketing Channel Systems

CHAPTER 4
Behavioral
Processes in
Marketing Channels
1
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Le ① The marketing channel as a social system
ar ② Behavioral processes
ni ③ How conflict emerges
ng ④ Causes of channel conflict
O
⑤ Conflict and channel efficiency
bj
⑥ Managing channel conflict
ec
tiv ⑦ Power in the marketing channel
es ⑧ Basic research findings
⑨ Roles in marketing channels
⑩ Communication processes 2

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Objective

1 Marketing Channel as Social System

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Objective

2 Behavioral Processes

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Objective

3 How Conflict Emerges

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Objective

4 Causes of Channel Conflict

1. Role Incongruities
2. Resource Scarcities
3. Perceptual Differences
4. Differences of Expectations
5. Decision Domain Disagreements
6. Goal Incompatibilities
7. Communication Difficulties

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Objective

5 Conflict & Channel Efficiency

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 Effects of Channel Conflict (1 of 3)

Negative Effect: Reduced Efficiency

As the level of conflict increases,

Channel efficiency declines

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 Effects of Channel Conflict (2 of 3)

No Effect: Efficiency Remains Constant

Exists in channels characterized by high level of

dependency among members
Channel efficiency is not affected

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 Effects of Channel Conflict (3 of 3)

Positive Effect: Efficiency Increased

Conflict might be impetus for either or both

members to reappraise their policies
Channel efficiency increases

10

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Objective

6 Managing Channel Conflict

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 Detecting Channel Conflict

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 Appraising the Effect of Conflict

Subjective process that relies on manager’s

judgment

13

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 Resolving Conflict

Creative action on the part of some party to the

conflict is needed if the conflict is to be
successfully resolved.

Conversely, if conflict is simply “left alone,” it is

not likely to be successfully resolved and may
get worse.

14

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Objective

7 Power in the Marketing Channel

The capacity of a particular channel member to

control or influence the behavior of another
channel member
Keys to understanding Power:
• Power Bases
• Use of Power Bases

15

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 Bases of Power for Channel Control

Reward Power

Coercive Power

Legitimate Power

Referent Power

Expert Power

16

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 Using Power in the Marketing Channel

1. Identify available power bases Bases are a

function of size of:
• producer or manufacturer
• organization of channel
• particular set of circumstances

2. Select and use appropriate

power bases to better or
worsen channel relationships

17

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Objective

8 Basic Research Findings (1 of 3)

Classic Findings
1. Expert and referent power in conventional
channels may be more effective than direct
monetary incentives or threats in inducing channel
members to accept controls.
2. Power employed by manufacturers based on
economic rewards or coercion provided a higher
degree of control over channel members than
power based on legitimacy, expertise, or reference

18

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 Basic Research Findings (2 of 3)

Non-coercive power bases increase satisfaction in

“weaker” channel members, such as franchises
1. Franchisees are likely to have higher morale.
2. Franchisees are more likely to cooperate with the
franchisor.
3. Franchisees are less likely to terminate their contracts.
4. Franchisees are less likely to file individual suits against
the franchisor.
5. Franchisees are less likely to file class action suits.
6. Franchisees are less likely to seek protective legislation
such as the “Franchise Full Disclosure Act” (1970). 19

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 Basic Research Findings (3 of 3)

General Inferences from findings

1. Power must be exercised to influence member behavior.

2. Effectiveness of power bases to influence members is
situation-specific.
3. The exercise of power and how it is used affects the
degree of cooperation, conflict, and satisfaction among
channel members.
4. The use of coercive power probably promotes conflict and
dissatisfaction to a greater degree than the other power
bases.
5. The use of coercive power can reduce channel’s stability
and viability.
20

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Objective

9 Roles in Marketing Channels (1 of 2)

A set of prescriptions defining what the

behavior of a position member should be

• Roles change over time.

• Straying far from a role may cause conflict.
• Roles help describe & compare the
expected behavior of channel members and
provides insight into the constraints under
which they operate.
21

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 Roles in Marketing Channels (2 of 2)

Questions to help the channel manager

• What role does the channel manager expect a

particular channel member to play in the channel?
• What role is this member expected to play by his
or her peers?
• Do the manager’s expectations for this member
conflict with those of the member’s peers?
• What role does this member expect the manager
to play?

22

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Objective

10 Communication Processes (1 of 2)

Behavioral Problems in Channel Communications

1. Differences in 2. Differences in the

goals between kinds of language
manufacturers & they use to convey
Their retailers information

23

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 Communication Processes (2 of 2)

Behavioral Problems in Channel Communications

3. Perceptual 4. Secretive 5. Inadequate

differences Behavior frequency of
among communication
members

24

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 Discussion Question #2

Bill Schwartz, the owner of Newvalue Supply, a medium-

sized wholesaler of plumbing supplies, was furious. He had
just gotten off the phone with the sales manager of
Jefferson Industries, the manufacturer of a very profitable
line of high-quality faucets that Newvalue had been selling
for several years. “That SOB is now going to start selling
the big home center accounts directly,” fumed Bill Schwartz
to his son Paul. “We’ve worked real hard to establish this
line and then, when it finally gets going with some real
volume, Jefferson wants to cut us out,” he continued.
Discuss the possible underlying causes of the conflict
that seems to be emerging in this situation.

25

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 Discussion Question #3

Amoco, one of the nation’s largest oil companies, has been

forcing a number of its independent service stations to convert
from full-service stations offering repair service to convenience
stores or “gas only” stations. Thus the highly profitable repair
part of the business will no longer be available to those station
owners forced to convert. The franchised independent dealers
have little choice but to give in to Amoco because the oil
company typically owns the station’s land and buildings and
offers leases of only three years or less. This arrangement
appears to vest all of the power with the producer and virtually
none with the dealers.
Discuss this situation in light of the bases of power and the
possible
26

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 Discussion Question #6

In the summer of 2009, Walmart, the world’s largest retailer, left no

doubt about its enormous power in the marketing channel. Walmart
announced to all manufacturers whose products it sells that they must
adhere to Walmart’s new “green” environmental initiative. The manufacturers
must estimate and disclose the environmental costs of producing their
products and then allow Walmart to use that information to develop a “green”
rating system that will be disclosed to consumers on product labels. The
cost of the “green” program will be borne entirely by the 100,000 Walmart
suppliers. Although the program will take a number of years to fully
implement, some parts of it may be in place by as early as mid-2011.
Suppliers will not be able to opt out of this program. So all of them, from the
largest to the smallest, will have to participate. If they do not, Walmart has
made it clear that those suppliers will likely be dropped by the giant retailer.
What power base(s) appear to be in play in this situation? What do you
think Walmart is trying to accomplish here by exercising its great power in
the marketing channel?
27

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