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Distribution Channel Management
Chapter 7
Managing Conflict
To Increase Channel Coordination
Chapter 7 Outlines
Learning Objectives
- Distinguish circumstances where conflict is not negative
- Understand how to diagnose conflict in terms of
issues, frequency, intensity and importance
- Understand three major sources of conflict: goals,
perceptions, and domains
- Understand why multiple channels have become the
norm and describe ways to address the conflict
- What is Gray Marketing and how it actually happens?
Managing Channel Conflict
Points of Discussion
- What is Channel Conflict?
- What are the effects of conflict, both for short and
long term?
- How does conflict arise and how can it be managed?
- What are the best strategies for containing destructive
and excessive conflict?
- Learn strategies of resolving the conflict
- Categorize conflict resolution styles and describe
their effect
Managing Channel Conflict
The Meaning:“Channel conflict is behavior by a channel member
that is in opposition to its channel counterpart.
It is opponent centered and direct, in which the
goal object sought is controlled by the counterpart”
Managing Channel Conflict
The Implication of channel conflict
- A negative in many channel relationship
- Sometimes channel are too peaceful, indifference,
masking great differences
- Conflict is desirable for members to raise their difference
and working to search for better understanding and
higher performance
- Conflict should not be judged as a defect, a state
to be eliminated
- Conflict should be monitored and then managed
Managing Channel Conflict
Four different kinds of information to gather and
combine to form an index of manifest conflict
1. Counting up the issues – what are the major issues?
2. Importance – ascertain the importance on each issue
3. Frequency of disagreement – how often the two
parties disagree over each particular issue?
4. Intensity of dispute – ascertain how far apart the two
parties on each particular issue
The Consequences of Conflict
Points of Discussion
- Is conflict always undesirable?
- When will conflict be desirable (functional)?
- Are peaceful channels better channels
(conflict is low)?
- Can conflict improve channel members’
performance?
The Consequences of Conflict
Functional conflict is desirable if members
- Communicate more frequently and effectively
- Establish outlets for expressing their grievances
- Critically review their past actions
- Devise and implement a more equitable split of system
resources
- Develop a more balanced distribution of power in
their relationship
- Develop standardized ways to deal with future conflict
and keep it within bounds
Major Sources of Conflict
Conflict is a staple in marketing channels
because of
- Built-in differences in viewpoint and goals
- Differing perceptions of reality
- Clash over domains (roles, responsibilities,
territories)
Major Sources of Domain Conflict
Multiple channels is major source of market
domain conflict
- Multiple channels: Using more than one route to get to
the same market
- Different kinds of multiple channels: Dual distribution,
plural distribution, hybrid distribution
- Customers can find products easier to match their needs
- Downstream members may lose motivation, withhold
support, retaliate or exit the business
Major Sources of Domain Conflict
Ways that suppliers address multiple channel
conflict
- Devise different pricing schemes for different channels
- Offer more support, more service, more product and
even different products to different channel types
- Offer the same product under different brand names
to different channels
- Sell primary part of the product line through one
channel and secondary or peripheral products
through another
Major Sources of Domain Conflict
Point of Discussion
- What is Gray Marketing?
- How can this happen?
- Is the trend getting increasing or decreasing?
- What are the advantages and disadvantages
to suppliers?
Major Sources of Domain Conflict
Gray market: The unwanted channels
- “Gray marketing is the sale of authorized, branded
product through unauthorized distribution channels”
- Gray marketing can be contrasted with black marketing
or counterfeiting which involves selling fake goods as
branded ones
Major Sources of Domain Conflict
Development of gray market coming from
- Suppliers offer differential pricing to different channel
members
- Suppliers practice pricing differently to different
geographic markets
- Domestic products sold through high-service, high-price
channels at home
- Development of emerging markets and worldwide
liberalization of trade
- Price differences exist across boundaries or territories
Conflict Management
Points of Discussion
- How dealers react once the destructive action
from suppliers taken place?
Conflict Management
Reaction from dealers upon destructive incidences
Dealers blame themselves
- Constructive engagement
- Withdrawing from the relationship
Dealers blame the suppliers
- Less likely to accept the situation passively
- More likely to take any sort of action
Dealers blame the environment
Conflict Management
Five different types of reaction from dealer to deal
with disputes against suppliers
1. Passive acceptance: saying or doing very little
about the issue
2. Venting: complaining vigorously without taking action
3. Neglecting the supplier
4. Threatening to resign the line
5. Engaging the supplier in constructive discussion
Managing Channel Conflict
Points of Discussion
• How do channel members cope with
conflict?
Conflict Resolution Strategies
Two approaches are presented
1. Develop institutionalized mechanisms
- Joint memberships in trade associations
- Distributor councils for two-way communication
- Exchange of personnel programs (learning, knowing
the other party’s tasks and interests)
- Co-optation to share responsibility
- Third-party mechanisms (mediation, arbitration)
Conflict Resolution Strategies
Two approaches are presented
2. Use common norms to resolve conflict
- Flexibility (adapt to changing circumstances)
- Information exchange (share all pertinent information)
- Solidarity (work for mutual benefit)
Conflict Resolution Strategies