Mata kuliah
Tahun
: 00274 - INTEGRATED MARKETING COMMUNICATION
: 2009/2010
CHANNEL STRATEGY :
Avoiding Channel Conflicts
Pertemuan 25 & 26
Channel Strategy:
Avoiding Channel Conflicts
 New technologies bring new opportunities to channel
designers, marketers, and business strategists.
 From catalog selling, which grew out of improved rail and
postal technologies, through today’s Internet and
wireless
shopping
opportunities,
companies
continually face an array of new methods and
choices for reaching customers.
 Yet many suppliers failed to exploit new channel
opportunities for fear of creating conflict with their
existing channels.
 Such fears are far from groundless.
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Choosing to Change (1)
 Most suppliers can envision the opportunities new
technologies present in the form of new channel
designs – increased geographic penetration, market
share growth, and higher profit margin.
 And many can go so far as to articulate these goals as
their strategic direction or intent, only to freeze
when faced with the conflicts that arise from acting
on these intention.
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Choosing to Change (2)
 But such paralysis can be overcome.
 With the right tools, suppliers can identify the source of
channel conflict in their industries and use this
knowledge to devise business-expanding strategies
that do not unduly threaten the economic interest of
their existing channels.
 One strategy less threatening than pure online selling is
targeting a small sub-segment of customers who a
re reachable only online.
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Choosing to Change (3)
 For example, Timex sells watches online to a customer
segment who wants more variety than most of its
retailers can provide.
 By selling only at the manufacturer’s suggested retail
price – higher than most retailers charge and more
than most retailer shoppers are willing to pay –
Timex reaches a segment it could not easily target in
the physical channel, and it does so without
significant impact on its existing channel.
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Choosing to Change (4)
 Another conflict mitigating strategy is to introduce
different product lines specifically targeted to draw
on the capabilities of the new channel.
 FranklinCovey, a global professional-services firm,
leveraged online interactivity to introduce its Design
Your Own planner pages, binders, and cases.
 Customers find they can create a customized planning
system tailored to their needs and have it delivered
in less than two weeks, an offering not well suited to
delivery through traditional channel.
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Choosing to Change (5)
 What these companies have in common is that they
made the move to introduce new channel options by
first understanding their channel dynamics, then
conceiving of new ways to organize and group
channels activities to create value down the line and
thus overcome conflict.
 Two analytical tools that can help suppliers do the same
– evaluate their options and exploit opportunities to
create innovative sources of channel value are:
Channel Map and Channel Conflict Strategy Matrix.
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Mapping the Way (1)
 The channel map offers a bird’s-eye view of who’s who
and who does what in the channel.
 In effect, there are two maps:
 A status quo map identifies existing channel
participants and the topography of their existing
relationships. This map lays out where a company
stands in relation to its existing channels and
participants, and it is something every organization
should create before evaluating new opportunities.
 A future map incorporates likely change scenarios and
new relationships, roles, and interactions in the
channel. This map reflects the company’s vision of
the future its channel.
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Mapping the Way (2)
 By comparing two maps, companies can identify where
the channel change battle lines will be drawn and
where channe;l conflict will be most intense.
 Both maps are plotted using the same coordinates:
 Customer segments served
 Basic channel functions: inform, interact, transact,
deliver, and service the customer, performed either
exclusively or cooperatively by traditional channel
participants – suppliers, wholesalers, distributors,
and retailers – particularly in the newly conceived
channels, by broker, lenders and others.
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How Are the Maps Created?
 First by documenting existing channels – the customer
segments served and the partners employed in
delivering channel value.
 The process is not as simple in practice as it might in
theory.
 Uncertainty and disagreement often arise when companies
try to determine the segments currently served and
identify all the players in the channel chain.
 After defining channels, to indicate their relative
importance, the boxes on the mo can be sized based
on a third dimension, such as volume of customers or
profitability in the channel.
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Managing Conflict Strategically (1)
 Moving from the old map to the new is not likely to be
conflict-free.
 The more customer segments that are added, the
greater the likelihood that the new channels will
ruthlessly cannibalize the old.
 New segments do not always represent new customer
obtained from market growth; often they represent
customers called from the old segments.
 This cannibalization, with the associated loss of revenue
to the supporting channels, is one of the sources of
channel-change conflict.
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Managing Conflict Strategically (2)
 Changes in process require changes in channelparticipants.
 As channels specialize and form new roles, old players
face continual threats, at least until their place in the
new order is clear and secure.
 Clearly, making the transition from the first to the second
map gives rise to channel conflict.
 But proper analysis and appropriate strategies can go far
forward minimizing the amount of conflict and its
economic destructiveness.
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Managing Conflict Strategically (3)
 To aid this type of analysis and decision making, we have
created the channel conflict strategy matrix.
 Companies use the matrix to assess the forces and
opportunities for change in their industries vis-a-vis
each existing channel and to quickly identify optimal
change strategies (see Exhibit 5-3 on page 49).
 The matrix show the interplay between market power
and channel added value.
 Market power is a functional of where customer
influence resides – with the supplier and with the
channel.
 Channel added value measures how much worth the
channel creates for the customer, beyond what the
manufacturer provides.
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Four Core Strategy
 Once a company determines market power and channel
value for each existing channel, the matrix becomes
a framework for strategic thinking:
 Pointing to the safest and most effective strategy for
each of four potential combinations of channel
dimensions.
 Showing where to fight out conflicts and where to
mediate or avoid them.
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Compete
 If market power rests with the supplier, and the added
value of the channel is low, the supplier’s best
strategy is to compete with the channel.
 Consider the airline. Faced with significant financial losses
and a need to lower costs, they have continually
reduced travel agent commissions while active
investing in electronic ticketing and supporting Web
travel
sites
such
as
Travelocity.com
and
Expedia.com.
 All the while they have been building and promoting their
own direct site as well.
 They have gone so far as to advertise to consumers that
the lowest fares are likely to be found online.
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Forward Integrate (1)
 When traditional channel holds great market
power, yet the value it adds is low, suppliers
should consider invading the channel to
increase its capacity for value creation.
 The suppliers must create an innovative offering
that the regular channel cannot duplicate
and thus forestall possible conflict.
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Forward Integrate (2)
 In 1998, Gateway defied the conventional wisdom that
PC retailing was a dead end by launching its country
store
concept,
becoming
the
first
major
manufacturer to sell PCs through retail showrooms.
 These showroom stores have all the traditional display
models and sales help, but none of the inventory.
 Products are ordered on location through the Web, and
many services are delivered on-site.
 At one point, this strategy enabled Gateway to sell an
average of four non-PC items – including training.
 Internet services, financing, and solutions bundles – for
every PC sold. This has been a critical enabler of its
core strategy to sell “beyond the box”.
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