Channel Conflict

Channel Conflict

This are disagreements among marketing channel members on goals and roles i.e. who should do what for what rewards.eg

• Horizontal conflict-refers to same level (among retailers).
• Vertical conflict-this are conflicts between different levels e.g. (wholesalers and retailers).

CAUSES OF CHANNEL CONFLICT

1. Role incongruities – A role is a set of prescriptions defining what the behavior of the position member should be.
2. Resource scarcities – Disagreement over the allocation of some valuable resources needed to achieve a given goal may cause conflict
3. Perceptual differences – Perception refers to the way an individual selects and interprets environmental stimuli in relation to objective reality.
4. Exceptional differences – Channel members have expectations about the behavior of other channel members. These expectations are predications concerning the future behaviors of other channel members. These predictions could turn out to be inaccurate but non-the less channel members take action based on these predictions.
5. Decision Domain disagreements – Channel members’ explicitly or implicitly carve out for they an area of decision making that they feel is exclusively theirs. In contractual channel system, such as a franchise, these decisions domains are quite explicit and are usually spelled out meticulously in the franchise contract. But in more traditional, loosely aligned channels made up independent firms; the decision domains are sometimes “up for grabs”. Hence conflict can arise over which member has the right to make what decisions.
6. Goal incompatibilities – Each member of the marketing channel has his/her own goals and if these are incompatible, conflict arises.
7. Communication difficulties – Communication is the vehicle for all interactions among the channel members, where such interactions are cooperative or conflicting. Breakdown in communication can lead to conflict in the channel.

MANAGING CHANNEL CONFLICT

In practice, conflict is usually spotted after it is well developed and obvious. This is because the potentially negative effects of the conflict may have a head start and may be already out of hand.

It is therefore better for the channel manager to have some kind of early warning system using perception surveys, marketing channel audit and distributor’s advisory councils or channel members’ committees.

1. Dual compensation – this is applied when conflict exist between direct and indirect channels. The goal is to move the indirect channel from the position of potential adversary for direct sales force to one of partner for direct sales force.
2. Activity based compensation/discount – it is used to manage cross-channels conflict or conflict between channels of differing cost structures and capabilities. It is applied by paying a channel a specific discount if it performs a measurable task or function.
3. Compensation for market share – it is usually applied to direct versus indirect conflict, direct sales representatives is compensated based on total market in a territory. It motivates the direct representatives to partner with indirect channels to maximize territory volume.
4. Economic solutions-compensate channels fairly for function performed and help direct channels away from functions that create destructive conflict.
5. Control – Put a structure around a channel strategy to limit the potential for undue destructive conflict.

RESOLVING CONFLICT

Rosenberg suggested methods that a channel manager may use to resolve conflict. These are:-

1. A channel wide committee – comprising of manufacturers, distributors and retailers representatives
2. Joint goal setting by the committee.
3. A distribution executive position may be created for each major firm in the channel. The individual in this position will be responsible for exploring the firms distribution related problems, create awareness of the possible effects of conflict.
4. Arbitration, which is advantageous as it is fast, is less expensive than litigation, preserves secrecy, involves the industry experts and most importantly confronts the problem in the early stage when it is easier to solve.