Lecture Sales and distribution management: Chapter 13 - Krishna K Havaldar, Vasant M Cavale

Chapter
13
Channel Management

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Learning Objectives
• Understand how and why channel conflicts
occur
• Look at ways of managing conflict
• Channel practices followed to resolve
conflicts
• Principles of channel management
• Various parameters on channel policy
• Way in which services use marketing
channels
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Channel Management
• Is in three broad phases:
– Use of power bases

– Identifying and resolving channel conflicts
– Channel co-ordination

Use of power….

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Use of Power Bases
• Channel system has a set of players:
– Not equally motivated to implement the ideal
channel design
– Whose expectations from the system differ

• Use of the 5 power bases brings diverse
channel partners in line for effective
implementation
– 5 power bases are: reward, coercion, legitimate,
expert and referent (French & Raven)
– Two more power bases in the Indian context are
support and competition
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Use of Channel Power
• Channel members are dependent on each
other. The power equations between them
keep them working together.
• There are basically 5 types of power bases –
reward, coercion, expert, reference and
legitimacy. 2 more can be considered as
support and competition.
• Extent of dependence defines the power base
which is appropriate.
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French & Raven

“Power” of Motivation

• Reward – incentives for good performance
• Coercion – threat of punishment for nonperformance
• Referent – benefit of sheer association with a
strong company
• Legitimate – arising out of a contract
• Expert – specialized knowledge
• Support – additional benefits for better

performers only
• Competition – created between channel
partners
Countervailing power……
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Countervailing Power

Examples

• Balances the power exerted by one channel
member. It is not a one-sided equation.
• Both the channel member and the principal
can have influence on each other.
• Results from interdependence within the
channel system.
– Company exerts power on the distributor to get its
coverage and revenues
– Distributor has enough influence on his customers
and this is critical for the company also
– Weaker partners do get exploited – ancillary units

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Channel Co-ordination
• Channel system is well co-ordinated if each
member understands his role correctly and
performs it to help the system achieve its
customer service objectives.
• In a co-ordinated channel:
– Interests of all channel members are protected
– Actions of all are in line with overall objectives
– Flows are streamlined to desired customer service
objectives

• Channel co-ordination is an on-going effort
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Conflict….


Channel Conflicts
• Conflict is generated when actions of any
channel member come in the way of the
system achieving its objectives
• Three broad categories of channel conflict
are:

– Goal conflict – understanding of objectives by
various channel members is different
– Domain conflict – understand responsibilities and
authority differently
– Perception conflict – reading of the market place is
different and proposed actions vary
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Channel Conflict
CONFLICT

GOAL

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DOMAIN

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PERCEPTION

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Channel Conflict

• Situation of discord or disagreement between
partners in the same channel system – has
negative connotations and is driven more by
feelings than facts
• Conflict is part of any social system – getting
disparate entities to work together as in a
channel system is also one such social unit
• If any member feels that another is working in
a manner as to affect him, conflict results
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Conflicts Result From…
• Each channel member wanting to pursue his
own goals
• Each wants to retain his independence
• There are limited resources which all of them
want to utilise in achieving their goals
• Features of conflicts:
– Initially latent and does not affect the working
– Is not normally possible to detect till it becomes
disruptive
Four stages….

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Four Stages
LATENT

PERCEIVED

FELT

MANIFEST
Each stage is progressively more severe than the earlier one

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Types of Conflicts
• Latent Conflict:
– Some amount of discord exists but does not affect
the working or delivery of customer service
objectives.
– Disagreement could be on roles, expectations,
perceptions, communication.

• Perceived Conflict:
– Discords become noticeable – channel partners
are aware of the opposition.
– Channel members take the situation in their stride
and go about their normal business
– No cause for worry but the opposition has to be
recognized
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Types of Conflicts
• Felt Conflict:
– Reaching the stage of worry, concern and alarm.
Also known as ‘affective’ conflict.
– Parties are trying to outsmart each other.
– Causes could be economical or personal
– Needs to be managed effectively and not allowed
to escalate.

• Manifest Conflict:
– Reflects open antagonistic behaviour of channel
partners. Confrontation results.
– Initiatives taken are openly opposed affecting the
performance of the channel system.
– May require outside intervention to resolve
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Reasons for Channel Conflict
• Roles not defined properly
• Allocation of scarce resources between
members seem unfair to some
• Differences in perception of the
business environment

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Reasons for Channel Conflict
• Future expectations not likely to materialize
• Decision domain disagreements – who has to
decide on what (key account pricing)
• Channel members do not agree on objectives
• Misunderstanding or mis-interpretation of
routine business communication

Resolving….

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Resolving Conflicts
A 4 Stage Process
Understanding nature and intensity

Tracing the source of the conflict

Understand the impact of the conflict

Strategy and plan of action for resolution

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Conflict Resolution Styles
Avoidance

Styles are a combination
of assertiveness and
co-operation. 

Aggression
Accommodation

Compromise
Collaboration
Least effort and
results

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Maximum effort and
Best results

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Kenneth W Thomas


Avoidance
• Used by weak channel members.
• Problem is postponed or discussion
avoided.
• Relationships are not of much
importance.
• As there is no serious effort on getting
anything done, conflict is avoided.
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Aggression
• Also known as a competitive or selfish style.
• It means being concerned about one’s own
goals without any thought for the others.
• The dominating channel partner (may be the
principal) dictates terms to the others. Long
term could be detrimental to the system.

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Accommodation
• A situation of complete surrender.
• One party helps the other achieve its goals
without being worried about its own goals.
• Emphasis is on full co-operation and flexibility
in approach. May generate matching feelings
in the receiver.
• If not handled properly, can result in
exploitation
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Compromise
• Obviously both sides have to give up
something to meet mid way.
• Can only work with small and not so
serious conflicts.
• Used often in the earlier two stages.

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Collaboration
• Also known as a problem solving approach
• Tries to maximize the benefit to both parties
while solving the dispute.
• Most ideal style of conflict resolution – a winwin approach
• Requires a lot of time and effort to succeed.
• Sensitive information may have to be shared

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Channel Policies
• Defines how the channel is required to
operate.
• Normally framed by the channel principal to
guide the operations of the channel system
• If not framed properly could prove the starting
point of channel conflicts.
• Some subjects of channel policies could be
as seen in the next slide:
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