Prof. Suvendu Kr. Pratihari spratihari@mimts.org
Prof. Suvendu Kr. Pratihari 11

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Vertical Marketing System
Horizontal Marketing System
Multi-Channel Marketing System
Prof. Suvendu Kr. Pratihari 2

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It is the conventional marketing system of a producer, distributor and retailer.
Each of the channel members including the company act independently and trying to run a profitable business.
When all these entities were to act together to provide service to the end user, it would be called Vertical
Marketing System (VMS)
Prof. Suvendu Kr. Pratihari 3

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This system operates between two or more unrelated companies, but arrangement of working together provided benefits to both, Commonly known as “tieups”
Each companies has seen their respective strength, which can be exploit to its advantage.
Example – Supermarkets and airports having ATM of leading banks
Exp – Big hotels having CCD outlets, Cell Phone outlets etc.
Prof. Suvendu Kr. Pratihari 4

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Here, companies use two or more marketing channels to reach different customer segments.
Prof. Suvendu Kr. Pratihari 5

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To understand how and why channel conflicts occur?
To explore different types of channel conflict
To discuss ways of managing channel conflict
Channel practices to resolve conflict
CASE: Bajaj Fan
CASE: Finolex
Cables
Prof. Suvendu Kr. Pratihari 6

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Channel Management is in three broad phases
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Use of Power to Motivate Channel Members
Identifying and Resolving Channel Conflicts
Channel Coordination
Prof. Suvendu Kr. Pratihari 7

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Channel conflict is generated when one channel member’s action prevent another channel from achieving its goal.
Conflict could be the result of :
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Each channel member wanting to pursue his own goal
Each wants to retain his independence
There are limited resources, which all of them want to utilize to achieve their goal
Prof. Suvendu Kr. Pratihari 8

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Sources of Channel Conflict
Difference in Goals: The objective of company and the distributor may not always match.
Exp: Manufacturer may want to achieve rapid market penetration through a low-price policy. Dealers, in contrast, may prefer to work with high margin and pursue short-run profitability.
Exp: In a situation of intense competition, the company would like the distributor to enhance its inputs to his customers like:
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Increase frequency of market visit
Provide a sales force for full market and outlet coverage.
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Extent more credit
Compromise with some of his margin and discount more
Keep more stock
Work market with ready stock
Prof. Suvendu Kr. Pratihari 9

Sources of Channel Conflict…contd.
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Difference of perception: The manufacturer may be optimistic about the short-run economic opportunity and want dealers to carry higher inventory, but the dealers may be pessimistic.
Resource Scarcity: Allocation among channel members of valuable resources seems unfair to some of them.
Roles are not defined properly
Addition of New Channel Partner
Target Fixing Exercise
Extension of credit
Expectation of Channel Members
Prof. Suvendu Kr. Pratihari 10

Sources of Channel Conflict…contd.
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Intermediaries’ dependence on manufacturer : The exclusive dealers such as auto dealers are affected by manufacturer’s products and pricing decisions. This situation creates a high potential for conflict.
Communication Difficulties : Misunderstandings or misinterpretation of routine communication
Loss of Opportunity
Prof. Suvendu Kr. Pratihari 11

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Vertical Channel Conflict: Conflict between different levels within the sale channel
Horizontal Channel Conflict: Conflict between members of the same level
Multichannel Conflict: It happens when manufacturer has established two or more channels that sell to the market.
Prof. Suvendu Kr. Pratihari 12

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Steps to undergo for resolving conflict
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Step-1: Understanding the nature of the conflict and measuring its intensity
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Identifying and prioritizing the issues – Monitoring the frequency of occurrence – Collecting the views of the parties about the problem.
Step-2: Tracing the source of the conflict
Step-3: Finding out the consequence of the conflict
Step-4: Action plan for conflict resolution
Prof. Suvendu Kr. Pratihari 13

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Adoption of Superordinate Goal: In this case, the channel members come to an agreement on the fundamental goal they are seeking. Whether it is survival, market share, customer satisfaction or service quality.
Joint Membership in Trade Associations
Sharing of valuable information may develop trust and reduce conflicts.
Clear rules of conduct to help build good relationship
Working together for sharing responsibilities
Prof. Suvendu Kr. Pratihari 14

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Joint goal setting by the channel principal and its channel members.
Use of channel motivation programs
Diplomacy
Use of legal and ethical practice
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The company can’t formally designate the territory to be covered by a channel member. This protects both the company (in appointing more dealers) and the channel members who can see beyond the designated territory.
The company can not force the channel partner to sell any specific product, which may be slow moving or fast moving
Prof. Suvendu Kr. Pratihari 15

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For retailers – Payments for shelf-display space
High trade discount than competition
High margin for better distribution efforts measures n terms of coverage, distribution and productive calls.
Strong promotional support
Support of field salespeople – Particularly in achieving secondary sales.
Challenging sales target and joint planning to achieve them.
Assured outdated stock return
Provide Sales Training to distributors’ sales men
Provide logistical support
Offering credit support
Generate customer leads and pass to channel members
Communicate promptly all crucial marketing decisions
Discuss with the channel partners for useful suggestions for implementation
Prof. Suvendu Kr. Pratihari 16

Prof. Suvendu Kr. Pratihari suvendupratihari@gmail.com
933 777 3456
Prof. Suvendu Kr. Pratihari