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Channel Conflict

Channel Conflict. Prof. Suvendu Kr. Pratihari spratihari@mimts.org . 1. Channel System. Vertical Marketing System Horizontal Marketing System Multi-Channel Marketing System. Vertical Marketing System. It is the conventional marketing system of a producer, distributor and retailer.

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Channel Conflict

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  1. Channel Conflict Prof. Suvendu Kr. Pratihari spratihari@mimts.org Prof. Suvendu Kr. Pratihari 1

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

  3. 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) Prof. Suvendu Kr. Pratihari

  4. Horizontal Marketing System • This system operates between two or more unrelated companies, but arrangement of working together provided benefits to both, Commonly known as “tie-ups” • 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

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

  6. Objectives • 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

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

  8. 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 Prof. Suvendu Kr. Pratihari

  9. 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 Prof. Suvendu Kr. Pratihari

  10. 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 Prof. Suvendu Kr. Pratihari

  11. 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 Prof. Suvendu Kr. Pratihari

  12. 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. Prof. Suvendu Kr. Pratihari

  13. 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 Prof. Suvendu Kr. Pratihari

  14. 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 Prof. Suvendu Kr. Pratihari

  15. Conflict Resolution…contd. • Joint goal setting by the channel principal and its channel members. • Use of channel motivation programs • Diplomacy • 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 Prof. Suvendu Kr. Pratihari

  16. 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 Prof. Suvendu Kr. Pratihari

  17. Thank You Prof. Suvendu Kr. Pratihari suvendupratihari@gmail.com 933 777 3456 17 Prof. Suvendu Kr. Pratihari

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