Channel Management

CONFLICTS RESOLUTION
 Learning Objectives
2

Understand how and why channel conflicts

occur
Look at ways of managing conflict
Channel practices followed to resolve conflicts
Principles of channel management
Various parameters on channel policy
Way in which services use marketing
channels
 Channel Management
3

Is in three broad phases:

 Use of power bases
 Identifying and resolving channel conflicts
 Channel co-ordination

Use of power….
 Use of Power
4 Bases
Channel system has a set of players:
 Not equally motivated to implement the ideal channel
design
 Whose expectations from the system differ

Use of the 5 power bases brings diverse channel

partners in line for effective implementation
 5 power bases are: reward, coercion, legitimate,
expert and referent (French & Raven)
 Two more power bases in the Indian context are
support and competition
 Use of Channel
5 Power
Channel members are dependent on each other.
The power equations between them keep them
working together.
There are basically 5 types of power bases –
reward, coercion, expert, reference and legitimacy.
2 more can be considered as support and
competition.
Extent of dependence defines the power base
which is appropriate.
 French & Raven

“Power” of 6Motivation
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

Countervailing power……
 Countervailing Power
7

Balances the power exerted by one channel

member. It is not a one-sided equation.
Both the channel member and the principal can
have influence on each other.
Results from interdependence within the channel
system.
 Company exerts power on the distributor to get its
coverage and revenues
 Distributor has enough influence on his customers and
Examples

this is critical for the company also

 Weaker partners do get exploited – ancillary units

Co-ordination…
 Channel Co-ordination
8

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

Conflict….
 Channel 9Conflicts
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
 Channel10Conflict

CONFLICT

GOAL DOMAIN PERCEPTION

 Channel11Conflict
Situation of discord or disagreement between
partners in the same channel system – has
negative connotations and is driven more by
feelings than facts
Conflict is part of any social system – getting
disparate entities to work together as in a channel
system is also one such social unit
If any member feels that another is working in a
manner as to affect him, conflict results
 Conflicts Result
12 From…
Each channel member wanting to pursue his own
goals
Each wants to retain his independence
There are limited resources which all of them want
to utilise in achieving their goals
Features of conflicts:
 Initially latent and does not affect the working
 Is not normally possible to detect till it becomes
disruptive

Four stages….
 Four Stages
13

LATENT

PERCEIVED

FELT

MANIFEST

Each stage is progressively more severe than the earlier one

 Types of Conflicts
Latent Conflict: 14

 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
 Types of Conflicts
Felt Conflict: 15

 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
16 Conflict
Roles not defined properly
Allocation of scarce resources between
members seem unfair to some
Differences in perception of the business
environment
 Reasons for Channel
17 Conflict

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

Resolving….
 Resolving Conflicts
18

A 4 Stage Process
Understanding nature and intensity

Tracing the source of the conflict

Understand the impact of the conflict

Strategy and plan of action for resolution

 Conflict Resolution
19
Styles
Avoidance Styles are a combination
of assertiveness and
Aggression co-operation.

Accommodation

Compromise

Collaboration

Least effort and Maximum effort and

results Best results

Kenneth W Thomas
 Avoidance
20

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
21

Also known as a competitive or selfish style.

It means being concerned about one’s 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
22

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
23

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
24

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
 Channel25Policies
Defines how the channel is required to operate.
Normally framed by the channel principal to guide
the operations of the channel system
If not framed properly could prove the starting
point of channel conflicts.
Some subjects of channel policies could be as seen
in the next slide:
 Channel26Policies
Markets to be covered
Customer coverage
Pricing
Product portfolio to be handled
Selection, termination of channel members
Ownership of the channel
 The Services
27 Sector
Twice the size of the manufacturing sector
Services offered are to be in line with customer
demand
Services have to be presented in an appealing
manner to sustain customers.
Needs specialized channels which understand the
characteristics of service delivery
 5 Characteristics
28
of Services
They are intangible – can only be felt. No visual
features like size, style.
They are inseparable from their service providers –
a 3P cannot deliver
They cannot be standardized – custom made and
delivered
Customers are involved to a great degree – define
the services
They are perishable – cannot be stored for delivery
later. Salvage value of an unsold service is zero.
 Channels Used
29

Shorter channels than for products

Some channels used are:
Direct from service provider to user
 Agents or brokers to bring buyer and seller together

 Franchisees or contractors
 Electronic channels

High degree of customization is provided

 Key Learnings
30
 Channel management is done by: use of power bases,
identifying and resolving channel conflicts and co-
ordination
 Channel conflicts could occur due to: goal conflicts,
domain conflicts and perception conflicts
 Channel conflicts pass thru’ the 4 stages of latent,
perceived, felt and manifest.
 Conflicts are avoided with the use of power bases of
rewards, coercion, expertise, legitimacy and reference.
 There are 5 styles of conflict resolution: avoidance,
aggression, accommodation, compromise and
collaboration
 Key Learnings
31
 Channel conflicts are resolved by joint membership of
associations, exchanging personnel or arbitration
 Channel management involves the four steps of
planning, organisation structure, control of the
channels and measuring performance for continuous
improvement
 Services are distinguished by 5 characteristics of being
intangible, inseparable from service providers, cannot
be standardised, customers are involved in service
delivery and are perishable. Distribution channels
should take these into account.