BUS 113 Week 3 - Channel Conflict and Power

Marketing channel is a social system

Interactions among actors occurs in channel

Interactions are not just economic, but have behavioral dimensions (conflict, roles, power, communication)

Conflict emerges when

A channel member perceives that another member’s actions impede attainment of its goals

Value-added Reseller (VAR)

Buys products from variety of vendors, assemble and package products, sells to market

Common in tech markets

Causes of channel conflict

Role incongruity, perceptual differences, goal incompatibility, communication difficulty

Role Incongruity

A franchisee is supposed to operate in accordance with franchisor’s procedures

Franchisee making its own policies will result in conflict

Perceptual Differences

Manufacturer may give brochures to retailers to pass onto customers

But they may perceive it as a waste of time and space

Managing Channel Conflict (3 steps)

Detecting conflict, appraising effect of conflict, resolving conflict

Detecting conflict

Regularly survey member’s perceptions

Do channel audits (periodic evaluation of key areas)

Form committee of channel members

Appraising effect of conflict

Relies on manager’s judgement

Resolving Conflict

Form channel committees and set goals jointly

Arbitration (third party)

If conflict is left alone, it may get worse

Arbitration

Fast, secret, less expensive than litigation

Arbitrators have industry expertise

Channel Power

The capacity of a channel member to control or influence the behavior of another channel member

Bases of Power

A function of size, channel organization, circumstances

Apply correctly to improve channel relationship

Reward, coercion, legitimate, referent, expert power

Expert and referent power in conventional channels may be more effective than

Direct monetary incentives or threats in inducing channel members to accept controls

Power employed by manufacturers based on economic rewards or coercion provided

A higher degree of control than power based on legitimacy, reference, expertise

The use of coercive power may promote

Conflict and dissatisfaction to a greater degree than other power bases

Communication problems in channels

Make explicit the goals of retailers and manufacturers

Reduce differences in language used to convey info

Improve frequency of communication