CHANNEL CONFLICT

What is Channel Conflict?

In channel distribution, conflict is not
negative, rather, some conflict actually
strengthen and improves a channel.
Channel conflict arises when the behavior of
a channel member is in opposition, to its
channel counterpart. It is opponent centered
and direct, in which the goal or object sought
is controlled by the counterpart.
Coughlan, Anderson, Stern, Adel, p. 238
Types of Conflict
Latent conflict norm in marketing channels
conditions are right for contention by the
organization is unaware of it (lacking perception).
Perceived conflict cognitive, emotionless and
mental channel member senses some sort of
conflict exists; all in a days work.
Felt conflict affective conflict, when emotions do
enter the equation.
Manifest conflict visible, expressed in behaviour.
Usually seen as blocking each others initiative or
withdrawing support.

Measuring Conflict
Count counting # of Issues
Importance weighting or scale
Frequency frequency of disagreement
Intensity of dispute (how disparate)

CONFLICT = Importance
i
X Frequency
i
X Intensity
i


Index of Conflict can be used to compare members
in a channel
N

i=1
Desirable Conflict
Conflict can induce:
1. More frequent and effective communication
2. Create outlets for grievances
3. Members to critically review past actions
4. The more equitable split of resources
5. The balance of power to shift more equitably
6. Standardization for dealing with future
conflict and boundary delineation
Damage from Intense Conflict
High channel conflict can create costs

Trust diminished
Commitment to relationship in jeopardy
Reduction in financial rewards
Reduction in psychosocial benefits and
gratification from relationship
Sources of Conflict
Competing goals
Margins, unit sales, expense control, inventory, incentives,
promotions, allowances, volumes and thresholds, market
penetration objectives
Perceptions of reality
Attributes of product or service are
Application served and segments served
What is the competition
Domain of control
More often a perception that the other channel member is
not pulling their weight for a domain that should be theirs.

Fueling Conflict
The Conflict propensity is strongly correlated
to the quantity of historical incidence
Threats induction by punishments and/or
sanctions (Coercion can lead to escalating
conflict and ultimate channel damage)
Unbalanced power is indicative of short-term
relationship expectations propensity for
conflict is increased

Conflict RESOLUTION STRATEGIES
Information-Intensive Mechanism
Risk sharing sensitive information with trust and cooperation or via a
diplomat
Joint membership in Trade Associations
Personage exchange
Co-aptation (involving channel members in corporate decisions)
Third-Party Mechanism
Mediation
Institutionalized Arbitration process
Building Relational Norms
Flexibility, Info Exchange, and Solidarity
Channel Conflict
A channel conflict may be defined as A
situation in which one channel member
perceives another channel member(s) to be
engaged in behavior that prevents it from
achieving its goals.
Conflict is opposition, disagreement or discard
among the organizations.
Channel Conflict
Conflict is not always undesirable.
It is needed to have positive effect as
loopholes in the existing system can be
plugged timely and performance can be
maximized.
It can keep other channel members on their
toes knowing that a decline in performance
might lead to a change in the channel
arrangements.
Types of conflict

Each channel member views the conflict, the relationship and
the tensions differently. Following are the types of channel
conflicts
Latent conflict The channel members may be unaware
about the opposition. They do not fully sense the conflict. This
is due to the separate or un-conflicting goals.
Perceived conflict The channel members sense that some
sort of opposition of perceptions, of interest, or of intensions
exists. It is more psychological, i.e. two organizations can
perceive that they are in disagreement but their individual
members do not consider it as a very serious issue.
Types of conflict

Felt conflicts When channel members not only perceive the
opposition or disagreement but also feel it actually they are
felt or affective conflicts. This needs to be sorted out at a early
stage to avoid further consequences.
Manifest Conflict If felt conflicts are not managed in time
and properly, they can become manifest or overt conflicts and
these conflicts stop the cooperation and understanding
between two organizations and block the other from
achieving its goals.
Functional Conflict When channel members accept that
there is opposition and disagreement but actually, this
opposition will improve their relationship, it becomes
functional conflict. It is common, obvious and sometimes
desirable too due to the interdependence of channel
members on each other.

Conflicts can also be classified as

Vertical conflict
Horizontal conflict
Inter type conflict
Multi Channel conflict
Vertical conflicts
Vertical conflicts occur due to the differences
in goals and objectives, misunderstandings,
and mainly due to the poor communication
Lack of role clarity and over dependence on
the manufacturers. For e.g. Today the large
retailers dominate the market and dictate the
terms. Hence there are often conflicts
between these giant retailers and the
manufacturers.
Wholesalers expect manufacturers to
maintain the product quality and production
schedules and expect retailers to market the
products effectively. In turn, retailers and
manufacturers expect wholesalers to provide
coordination functional services. If they fail to
conform each others expectations, channel
conflict results.
Some common reasons for vertical conflict
are
Dual distribution i.e. manufacturers may
bypass intermediaries and sell directly to
consumers and thus they compete with the
intermediaries.
Over saturation, i.e. manufacturers permit too
many intermediaries in a designated area that
can restrict, reduce sales opportunities for
individual dealer and ultimately shrink their
profits.
Partial treatment, i.e. manufacturers offer
different services and margins to the different
channels members even at same level or favor
some members.
New channels, i.e. manufacturers develop
and use innovative channels that create threat
to establish channel participants.


No or inadequate sales support and
training to intermediaries from the
manufacturers.
Irregular communication, non co-
operation and rude behavior with the
channel members.

Stipulation of ordering in advance, high stock
holding and dumping the stock at the
intermediaries.
Delays in delivering the products or
sometimes dispatching the products without
confirmed order.
Refusal to replace or take back the goods
damaged in transit. Non co-operation in
replacement of faulty goods, repairing
services, and installations.

No co-operative advertisements.
Manufacturers do not share any expenses of
advertisements.
No or inadequate credit offered to the
intermediaries. Margins / commissions are not
sufficient and there is no periodic revision of
commission and other terms
Conflicts due to the Intermediaries
Actions
Intermediaries promote and sell more
private labels than promoting the
manufacturers brands.
Intermediaries encourage customers to
switch to private labels / competitive
products.
Intermediaries carry competing lines and
give more showroom space.
No support in the manufacturers
promotional efforts.
Intermediaries fail to get the expected /
promised efforts.
Intermediaries fail to collect payment
from market in stipulated time.
Intermediaries deliberately cut the prices
to harm the manufacturers.
Intermediaries refuse to service and
install manufacturers products.
No appropriate and timely market
feedback and report to the
manufacturers.


Horizontal conflicts
Horizontal conflicts are the conflicts between
the channel members at the same level, i.e.
two or more retailers, two or more franchisees
etc. These conflicts can offer some positive
benefits to the consumers. Competition or a
price war between two dealers or retailers can
be in favor of the consumers.
Reasons behind horizontal conflicts
Price-off by one dealer / retailer can attract
more customers of other retailers.
Aggressive advertising and pricing by one
dealer can affect business of other
dealers.
Reasons behind horizontal conflicts
Extra service offered by one dealer / retailer
can attract customers of others.
Crossing the assigned territory and selling in
other dealers / retailers / franchises area.
Unethical practices or malpractices of one
dealer or retailer can affect other and spoil
the brand image.


Inter Type conflict
Inter type conflict occurs when, the
Intermediaries dealing in a particular product
starts trading outside their normal product range.
For example, now the supermarkets such as
Foodworld also sell vegetables and fruits and thus
compete with small retailers selling these
products. Large retailers often offer a large
variety and thus they compete with small but
specialized retailers. This concept is called as
Scrambled Merchandising where the retailers
keep the merchandise lines that are outside their
normal product range.
Multi-channel Conflict
Multi-channel conflict occurs when the
manufacturer uses a dual distribution strategy,
i.e. the manufacturer uses two or more
channel arrangements to reach to the same
market.
Manufacturers can sell directly through their
exclusive showroom or outlets. This act can
affect the business of other channels selling
manufacturers brands.
Multi-channel Conflict
Manufacturers can bypass the wholesalers
and sell directly to the large retailers. Conflict
becomes more intense in this case as the large
retailers can enjoy more customers and so the
profit due to offering more variety and still
economical prices, which is possible due to a
volume purchase.

Resolving Channel Conflicts

Conflict is a natural phenomenon, which cannot be
eliminated. In channel management, it is a
inevitable as many individuals, institutions are
involved and they are interdependent. Certain
conflicts are constructive too.
The conflicts can be reduced and managed better to
reduce the friction in the channel management.
Various techniques can be used to resolve the
conflicts. It is important to find out the root cause
behind the conflict so that appropriate technique
can be used to resolve the conflicts and lasting
effect is possible.
Some techniques are as follows
Channel leadership Many channel conflicts can be
resolved through the effective channel leadership. Channel
leader is able to reduce conflicts because he possesses the
channel power. Channel power is the ability of one channel
member to influence another members marketing
decisions and goal achievement. It enables the leader to
influence overall channel performance. The channel leader
controls resources on which other members depend.
Channel power can increase conflict and reduce
cooperation if one channel member uses coercion to
influence others. Manufacturers, wholesalers or even
retailers can become the channel leaders. For example,
producers like IBM, Ford can act as channel leaders
because of their economic power.
Adoption of Super ordinate goals The channel
members come to an agreement on the
fundamental goal they are jointly seeking, whether
it is survival, market share, high quality or customer
satisfaction.
Exchange of persons between two or more
channel levels This helps in better understanding.
It can reduce the misunderstanding and conflicts
can be reduced substantially through this
communication. Each will grow to appreciate the
others point of view and carry more understanding
when returning to their position.
Co-Opt It is an effort by one organization to
win the support of the leaders of another
organization by including them in advisory
councils, board of directors so that they feel
that their opinions are being heard. Co-
optetion can reduce conflict provided both the
parties compromise some or the other issues
in order to win the support of the other side.

Joint membership in and between trade
associations Such associations bring all
participants under one roof for more exposure to
the public and to improve relations with each other
by understanding their problems.
Diplomacy Diplomacy takes pace when each side
sends a person or a group to meet with their
counterpart from the other side to resolve the
conflict. It makes sense to assign diplomats to work
more or less continuously with each other to avoid
the conflicts.


Third-Party Mechanisms When conflict is
chronic, and the above mentioned techniques
are ineffective, both the parties may have to
resort to third parties, which are not involved
or not the part of the existing channel.
Arbitration In this method, the two parties
agree to present their arguments to a third party
and accept arbitration decisions.

Mediation Mediation implies resorting to a neutral third
party who brings skills in conciliating the interests of the
two parties. Mediation is the process whereby a third
party attempts to secure settlement of a dispute by
persuading the parties either to continue their
negotiations or to consider procedural
recommendations that mediator may make. Mediator
has a fresh view of the situation and may perceive
opportunities that insiders cannot. Effective mediation
succeeds in clarifying facts and issues. Mediators help
the parties to set up their own decisions whereas in
arbitration it can be compulsory.