Chapter 6
• Managing Marketing Channels and
Channel Conflicts
Chapter 6 Managing Marketing Channels and Channel Conflicts
Chapter Plan
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Managing Marketing Channels
Integrated Marketing Channel
Concept of Conflict
Definition of Conflict
Channel Co-operation
Types of Conflict
Resolving Channel Conflicts
Chapter 6 Managing Marketing Channels and Channel Conflicts
Managing Marketing Channels
1.
2.
3.
4.
5.
Setting Channel Objectives
Deciding Channel Pattern
Selecting Channels
Training and motivating channels
Assessing channel performance and
modifying channel arrangements
Chapter 6 Managing Marketing Channels and Channel Conflicts
Integrated Marketing Channel
• Increasing trends towards using the
integrated marketing channels
– Vertical Marketing System
– Horizontal Marketing System
• All intermediaries can join to build an
Integrated Channel System and the can
become strategic partners.
Chapter 6 Managing Marketing Channels and Channel Conflicts
Conventional Marketing System
• Most common and widely used
arrangement
• All the members play similar roles
• Every member focuses only on his own
goals and profits.
• CMS is unstable
• Members are not having a common goal
Chapter 6 Managing Marketing Channels and Channel Conflicts
Horizontal Marketing System
(HMS)
• Integration of multiple intermediaries at the
same level under one management
structure.
• Merchandising Conglomerate is the best
example of HMS
• E.g.. McDonald’s, Pizza Ht
• Retailers like Wal-Mart have collaborated
effectively with their suppliers, channel
partners, customers, etc.
Chapter 6 Managing Marketing Channels and Channel Conflicts
VMS
• All participants work together in the
integrated manner
• Through this arrangement, wide maximum
distribution is possible at economy.
• This system is suitable and widely used for
consumer durables, pharmaceutical
products, FMCG or where expensive
distribution is required.
Chapter 6 Managing Marketing Channels and Channel Conflicts
Types Of VMS
a. Corporate VMS
b. Administered VMS
c. Contractual VMS
a. Wholesales sponsored voluntary chain
b. Retailer sponsored voluntary chain
c. franchise
Chapter 6 Managing Marketing Channels and Channel Conflicts
Multi-channel Marketing System
• Manufacturer uses two or more different
types of channels to sell the same
products to the different or even the same
buyers.
• Manufacturers follow different distribution
policies for the different segments
• Combination of HMS & VMS can be used
• E.g. Bata, Bombay Dying, Bajaj Auto
Chapter 6 Managing Marketing Channels and Channel Conflicts
Channel Conflict
• “ A situation in which one channel member
perceives another channel member-(s) to
be engaged in behaviour that prevent it
from achieving its goals.”
• Conflict is opposition, disagreement, or
discord among the organizations.
• Constructive conflict is a healthy
phenomenon
Chapter 6 Managing Marketing Channels and Channel Conflicts
Channel Co-operation
• Channel cooperation occurs when the
channel members work together for their
mutual benefits
• Channel members must work to improve
cooperation and reduce conflict to have
long-term satisfying relationships. The
must work hard to turn conflict into
cooperation
Chapter 6 Managing Marketing Channels and Channel Conflicts
Types of Conflict
1.
2.
3.
4.
5.
Latent Conflict
Perceived Conflict
Felt Conflict
Manifest Conflict
Functional conflict
Chapter 6 Managing Marketing Channels and Channel Conflicts
Classification of Conflicts
1.
2.
3.
4.
Horizontal Conflict
Vertical Conflict
Inter type Conflict
Multi-channel Conflict
Chapter 6 Managing Marketing Channels and Channel Conflicts
Reasons behind Vertical Conflicts
• i.e. manufacturer-dealer, manufacturerretailer, wholesaler-retailer, franchiserfranchisees
• Occurs due to the different in goals and
objectives
• Lack of role clarity
• Over dependence on the manufacturers
Chapter 6 Managing Marketing Channels and Channel Conflicts
Conflicts due to the Manufacture’s
Actions
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Dual Distribution
Over Saturation
Partial treatment
New Channels
No or inadequate sales support
Irregular communication
Stipulation of ordering in advance
Chapter 6 Managing Marketing Channels and Channel Conflicts
Conflicts due to the Manufacture’s
Actions
• Delay in delivery the products
• Dispatching products without confirm order
• Refusal to replace or take back the goods
damaged in transit
• No cooperative advertisements
• No or inadequate credit offer to the
intermediaries
Chapter 6 Managing Marketing Channels and Channel Conflicts
Conflicts due to the intermediaries’
action
• Promotion and sell of private labels
• Carry competing lines
• No support in the manufacture’s
promotional efforts
• Fail to collect payment from the market
• Price cut
• Refuse to service
• Lack of timely market feedback
Chapter 6 Managing Marketing Channels and Channel Conflicts
Reasons –Horizontal Conflicts
• Price-off by one dealer
• Aggressive advertising and pricing by one
dealer
• Crossing the assigned territory and selling
in other dealer ‘s area
• Unethical practices or malpractices of one
dealer or retailer
Chapter 6 Managing Marketing Channels and Channel Conflicts
Inter Type Conflict
• Occurs when, the intermediaries dealing in a
particular product starts trading outside their
normal product range.
• E.g. Super market selling vegetables compete
with small retailers
• Pan-bidi shops sells mobile prepaid cards
• This concept is called “ scrambled
Merchandising” where their retailers keep the
merchandise lines that are outside their normal
product range
Chapter 6 Managing Marketing Channels and Channel Conflicts
Multi-Channel Conflict
• Occurs when the manufacturer uses a
dual distribution strategy.
• Manufacturers can bypass the wholesalers
and sell directly to the large retailers
• This is common in ready-made garments.
• Often the retailer compete with company’s
own outlets
Chapter 6 Managing Marketing Channels and Channel Conflicts
Resolving Channel Conflicts
1. Channel Leadership
2. Adoption of super ordinate goals
3. Exchange of persons between tow or
more channel levels
4. Co-operation
Chapter 6 Managing Marketing Channels and Channel Conflicts
Resolving Channel Conflicts
5. Joint membership in and between trade
associations
6. Diplomacy
7. Third-party Mechanisms
1. Arbitration
2. Mediation
Chapter 6 Managing Marketing Channels and Channel Conflicts
Summary
• Increasing trends towards using the
integrated marketing channels
– Vertical Marketing System
– Horizontal Marketing System
• “ A situation in which one channel member
perceives another channel member-(s) to
be engaged in behaviour that prevent it
from achieving its goals.”
Chapter 6 Managing Marketing Channels and Channel Conflicts
Summary
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Channel conflicts can be classified as
Horizontal Conflict, Vertical Conflict,Inter type
Conflict, Multi-channel Conflict.
Channel cooperation occurs when the channel
members work together for their mutual
benefits
There are several ways to resolve channels
problems i.e. channel leadership, Co-optetion,
Diplomacy, Arbitration etc.
Chapter 6 Managing Marketing Channels and Channel Conflicts