Channel Conflicts.pptx

Channel Conflicts

1. CHANNEL CONFLICTS

2. INTRODUCTION Channel Conflict is a situation of discord or disagreement between channel members from the same marketing channel system Conflict could be the result of: Each channel member wants to pursue its own goals Each wants to retain his independence There are limited resources, which all of them wants to utilize in the pursuit of their goals

3. TYPES OF CHANNEL CONFLICTS

4. Vertical Channel Conflict : This type of conflict arises between the different levels in the same channel. E.g .The conflict between the manufacturer and the wholesaler regarding price, quantity, marketing activities, etc. Horizontal Channel Conflict : This type of conflict arises between the same level in the same channel. E.g . The conflict between two retailers of the same manufacturer faces disparity in terms of sales target, area coverage, promotional schemes, etc. Multichannel Conflict : This type of conflict arises between the different market channels participating in the common sale for the same brand. E.g.  If a manufacturer uses two market channels, first is the official website through which the products and services are sold. The second channel is the traditional channel i.e. through wholesaler and retailer. If the product is available at a much lower price on a website than is available with the retailer, the multichannel conflict arises.

5. STAGES OF CONFLICT Experts believe that conflicts can occur in four stages in any channel partnership. Each stage is progressively more severe than the earlier one.

6. LATENT STAGE: Some amount of discord exists but does not seem to be affecting the working of the channel partners nor affecting the achievement of customer service objectives PERCEIVED STAGE: This is the stage where the discord becomes noticeable. These types of conflicts are also called as: Attitudinal Conflict- disagreements on roles, expectations, perceptions & communications with each other Structural Conflict- Relate to goals not matching, independence & lack of resources FELT STAGE : This stage is also known as affective conflict as the channel gets affected by the discord between the players. Stage of worry, concern & alarm. This stage should be managed effectively and not let to escalate MANIFEST STAGE: At this stage of conflict, parties openly oppose the initiatives taken by the other party thereby affecting the performance of the channel system. The resolution may require an outside intervention. Even after the resolution, it may permanently alter the chemistry of the channel system.

7. REASONS FOR CHANNEL CONFLICTS Some of the reasons for conflicts between the channel partners are as follows: GOAL INCOMPATIBILITY: The objectives of the company & its distributors may not always match. In situation of intense competitions, the company would like the distributor to enhance his inputs to his customers like extend more credit, Offer more discounts, Keep more stocks etc. The inputs may increase the sales but will reduce the profitability of the distributor. NEW CHANNEL PARTNER TARGET FIXING EXERCISE: The company always feels that the distributor can do much more than he normally does & hence fix optimistic targets. Also, if the incentives are directly linked to achieving targets, there is an immediate source of conflict. CREDIT EXTENSION: Sometimes, company puts pressure on the channel partners to extend credit to an apparently big customer, not knowing his past credit record. The distributor feels that the company is dictating terms on how to run his business and resists.

8. DIFFERENCE IN PERCEPTION: The company sometimes persuade the distributors to stock more of the products whereas the distributor may want to watch the results before committing more working capital. UNCLEAR ROLE DEFINITION

9. EXAMPLES OF CHANNEL CONFLICT

10. CONFLICT RESOLUTION Conflict resolution can be defined as the informal or formal process that two or more parties use to find a peaceful solution to their dispute. STYLES OF CONFLICT RESOLUTION

11. ACCOMMODATION: It is a situation of complete surrender. One party helps the other achieve its goals without being worried about its own goals. This method strengthens the relationship. COLLABORATION OR PROBLEM SOLVING: This style tries to maximize the benefit for both parties while finding a solution to the dispute- a win-win approach. It requires a lot of time & effort to succeed. COMPROMISE: A solution where both parties agree to give up some of their requirements and find a mid-way solution. Can only work with small and not so serious conflicts. COMPETITION OR AGGRESSION: This means being concerned about one’s own goals without any thought for the others- a purely selfish style. AVOIDANCE: Often used by weak channel members. Can only happen where the relationship is not of much importance and the problem is postponed or discussion is avoided.