Channel Conflict


Channel Conflict

Prof. Suvendu Kr. Pratihari

Prof. Suvendu Kr. Pratihari 11

Channel System

Vertical Marketing System

Horizontal Marketing System

Multi-Channel Marketing System

Prof. Suvendu Kr. Pratihari 2

Vertical Marketing System

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)

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Horizontal Marketing System

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.

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Multichannel Marketing

Here, companies use two or more marketing channels to reach different customer segments.

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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


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Channel Management

Channel Management is in three broad phases

Use of Power to Motivate Channel Members

Identifying and Resolving Channel Conflicts

Channel Coordination

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Channel Conflict

Channel conflict is generated when one channel member’s action prevent another channel from achieving its goal.

Conflict could be the result of :

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

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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:

Increase frequency of market visit

Provide a sales force for full market and outlet coverage.

Extent more credit

Compromise with some of his margin and discount more

Keep more stock

Work market with ready stock

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Sources of Channel Conflict…contd.

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

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Sources of Channel Conflict…contd.

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

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Types of Conflicts

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.

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Managing Channel Conflicts

Steps to undergo for resolving conflict

Step-1: Understanding the nature of the conflict and measuring its intensity

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

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Conflict Resolution

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

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Conflict Resolution…contd.

Joint goal setting by the channel principal and its channel members.

Use of channel motivation programs


Use of legal and ethical practice

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

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Building Channel relationship

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

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Thank You

Prof. Suvendu Kr. Pratihari

933 777 3456

Prof. Suvendu Kr. Pratihari