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

Chapter 13, channel management. After studying this chapter you will be able: 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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Chapter

13 Channel Management

• 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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“Power” of Motivation

• Reward – incentives for good performance

• Coercion – threat of punishment for

non-performance

• Referent – benefit of sheer association with a

strong company

• Legitimate – arising out of a contract

• Expert – specialized knowledge

• Support – additional benefits for better

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

Conflict….

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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

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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Types of Conflicts

• Latent Conflict:

– Some amount of discord exists but does not affect

the working or delivery of customer service

– Parties are trying to outsmart each other.

– Causes could be economical or personal

– Needs to be managed effectively and not allowed

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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

Understanding nature and intensity

Strategy and plan of action for resolution Understand the impact of the conflict Tracing the source of the conflict

A 4 Stage Process

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Avoidance

• Used by weak channel members

• Problem is postponed or discussion

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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

• 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 win approach

win-• Requires a lot of time and effort to succeed.

• Sensitive information may have to be shared

• Some subjects of channel policies could be

as seen in the next slide:

• Product portfolio to be handled

• Selection, termination of channel members

• Ownership of the channel

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The Services Sector

• Twice the size of the manufacturing sector

• Services offered are to be in line with

customer demand

• Services have to be presented in an

appealing manner to sustain customers.

• Needs specialized channels which

understand the characteristics of service delivery

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5 Characteristics of Services

• They are intangible – can only be felt No

visual features like size, style.

• They are inseparable from their service

providers – a 3P cannot deliver

• They cannot be standardized – custom made and delivered

• Customers are involved to a great degree – define the services

• They are perishable – cannot be stored for delivery later Salvage value of an unsold

service is zero

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Channels Used

• Shorter channels than for products

• Some channels used are:

– Direct from service provider to user

– Agents or brokers to bring buyer and seller together

– Franchisees or contractors

– Electronic channels

• High degree of customization is provided

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Key Learnings

• Channel management is done by: use of power

bases, identifying and resolving channel conflicts and co-ordination

• Channel conflicts could occur due to: goal conflicts,

domain conflicts and perception conflicts

• Channel conflicts pass thru’ the 4 stages of latent,

perceived, felt and manifest

• Conflicts are avoided with the use of power bases of rewards, coercion, expertise, legitimacy and

reference

• There are 5 styles of conflict resolution: avoidance, aggression, accommodation, compromise and

collaboration

• Channel management involves the four steps of

planning, organisation structure, control of the

channels and measuring performance for continuous improvement

• Services are distinguished by 5 characteristics of

being intangible, inseparable from service providers, cannot be standardised, customers are involved in

service delivery and are perishable Distribution

channels should take these into account