1

Sales and Distribution

Management
1.1. Sales Management
1.2. Marketing Channels
1.3. Managing Marketing
Channels

Success
Publicati
on

Sales
Distribution

Introduction
In daily life, a layman deals with different transaction in terms of
selling and purchasing of goods and services.
In these transactions the second one persuades the first person.
Therefore, selling may be defined as persuading people to satisfy the
want of first one.
The person, who does this act, is called as the salesman, the result of
this action as sales, while these activities of the person, are supervised
and controlled by sales-management. In the present scenario sales
executives are professionals.

They plan, build and maintain effective organisations and design and
utilize efficient control procedures.

The professionals approach requires thorough analysis, market-efficient

qualitative and quantitative personal-selling strategy.
It calls for skilful application of organisational principles to the conduct
of sales operations. In addition, the professional approach demands the

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Sales Management

A sale is one of the most crucial functions of an organization. It is the

principal, and often, the only revenue generating function in the
organization. Sales have formed an important part of business throughout
history and will continue to do so. A constant evolution has been witnessed
in the sales function from the early Stone Age, through the Iron ages and
the middle Ages to sales in the twenty-first century.
A) Meaning:
The only department or function in an organisation that generates
revenue (or money) is the sales department. Salespeople working in a
sales department are employed as the firm's link to the customers. Sales
managers are needed to manage sales personnel.
B) Definitions:
1) American Marketing Associations:
Sales management means the planning, direction and control of
personal selling, including recruiting, selecting, equipping, assigning,
routing, supervising, paying and motivating as these tasks apply to the
personal sales force.

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Sales Management

C) Evaluation of Sales Management:

Following points are explained in detail evaluation of Sales Management:

Simple Trade Era

Production Era
Sales Era
Marketing Department Era
Marketing Organization Era

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Sales Management

C) Evaluation of Sales Management:

1) Simple Trade Era:
The beginning era identified as Simple Trade Era, lasted from the
beginning of the marketing concept to the mid 19th century. In this
period whatever products available were harvested with limited
offerings.
2) Production Era:
In the next stage the simple trade era was replaced by the production
era, continued until the great depression. In this era importance was
given on engineering and production.
3) Sales Era :
The sales era lasted between 1920s and 1940s, emphasized on
different marketing related aspects rather than product only. As
consumer markets were saturated and competitions were increasing
day by day so it was not easy to sell product without providing
adequate information about the brand.
4) Marketing Department Era:
During the post Second World War phase, World featured economic
boom resulted an urgent need of a separate department for marketing
called as Marketing Department Era.

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Sales Management

C) Evaluation of Sales Management:

5) Marketing Organization Era:
As the premise of the marketing concept became widely accepted so
the era of marketing organization emerged to take care of customers
need. Now customers are the focal point and all employees became
part of the marketing effort.
a) Relationship Marketing Concept:
This sub-stage within marketing concept identified as the
relationship marketing concept. The goal of the organization is to
build-up a long-term relationship with customers.
b) Social/Mobile Marketing Concept :
The second sub-stage within the marketing concept is identified as
social/mobile marketing concept. It summed-up the knowledge and
theories of its predecessor era but focuses on real-time connections
and social exchanges based on build-up relationship driven by the
consumers.

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Sales Management

D) Nature of Sales Management:

The nature or characteristics of sales management can be explained by:
Integration with marketing management,
Relationship selling, and
Varying sales responsibilities.
1) Integration with Marketing Management:
As sales management is a part of marketing management, sales
planning should be integrated with marketing planning. A company' s
marketing team typically consist of two basic groups:
Field selling (or personal selling) team, and
Head-quarter marketing team.

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Sales Management

D) Nature of Sales Management:

1) Integration with Marketing Management:
These headquarter based service and support functions are:

Promoti
on

Coordinati
on

Custom
er
service

Marketi
ng
researc
h

Marketi
ng
logistic
s

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Sales Management

D) Nature of Sales Management:

1) Integration with Marketing Management:
These headquarter based service and support functions are:
a) Promotion:
Consists of advertising, sales promotion, public relations, publicity,
and direct marketing.
b) Marketing research:
Collecting and interpreting information on customers, competitors,
products, markets and so on.
c) Marketing logistics:
Physical distribution of finished goods including warehousing,
inventory, transportation and order processing.
d) Customer service:
Pre-sales and post-sales service as well as delivery service to
existing and prospective customers.
e) Co-ordination:
Sometimes there is a need to co-ordinate between customers,
companys salespeople and production or operations, by employing
inside salespeople.

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Sales Management

D) Nature of Sales Management:

2) Relationship Selling:
Buyers and salespeople, who do business together have some type of
business (or working) relationships. Their relationships have a range or
spectrum, as shown in the Fig

Every relationship is an exchange, which is the process of obtaining a

desired product or service from someone by offering something in
return. In practice, the attitude and culture of the organisation are
reflected in the attitude and behaviour of individual buyers and
salespersons. Relationship marketing is basically the creation of
customer loyalty.
3) Varying sales Responsibilities/ sales Position:
Selling includes a variety of sales jobs, which are different from one
another. No two sales positions are similar. The term sales

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Sales Management

E) Scope of Sales Management:

The entire must of activities involved in sales management are depicted
in Figure.

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Sales Management

F) Emerging Trends in Sales Management:

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Sales Management

F) Emerging Trends in Sales Management:

1) Diversity among Sales-force:
There is always exist diversity between sales-force of an organization.
Sales manager has to accommodate himself with people of different
background within his sales-force.
2) Team Based Selling Approach:
In recent years it is common approach for the organization to sell the
product as a team to build long-term relationship with potential
customers. It is also very useful when technically complex products are
in the process to sell.
3) Multi-channel Operations:
In todays competitive world, multi-channel operation system is very
useful to reach out for potential customers in different ways. It is very
handy for
lowering channel cost,
Customized selling techniques with broad coverage.
4) Global Presence:
Being a global, it is very necessary to face stiff challenges from global
companies. Due to differences in culture, language and taste and
preferences of customers it is not easy to adopt global condition.

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Sales Management

F) Emerging Trends in Sales Management:

5) Innovative technology:
Revolution in technology helped companies to communicate with
world-wide customers in ease way. To promote products sales
management on behalf of organization should adopt new innovative
technology.
6) Better Customer Relationship Management (CRM):
Being a successful organization in todays competitive world it is
necessary to build long-term relationship with customers. It is less
costly to retain an old customer rather than acquiring a new one.
7) Ethical and Social Issues:
In recent years it is necessary to abide social and ethical issues such as
legal constraints, provide social values to customers expectations and
taking part in events related to corporate social responsibilities.
8) Professionalism within Sales-force:
Sales manager should have professional attitude to process sales
operation. As customers are well informed and aware about the market
condition thoroughly so it is necessary to gather knowledge, skills and
right attitude to motivate them.

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Sales Management

G) Sales Environment- Sales Management and the Environment:

Sales management in any organization is affected by environmental
factors. Such factors affecting sales could be behavioral, technological or
managerial
in nature.
1) Behavioral
Factors:
The consumer today has become more conscious
of the environment, and sales must adjust to a
variety of influences, like rising consumer
expectations, expanding power of major buyers,
customer avoidance of buyer-seller negotiations,
globalization of markets, fragmented markets.
2) Technological Factors:
The major technological factors that affect sales
are sales force automation, virtual sales offices,
and electronic sales channels.
3) Managerial Factors:
Managers respond to the change in the
environment by developing new strategies and
tactics to enhance sales effectiveness. They

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Sales Management

H) Sales Planning:
Most organizations find themselves operating in highly competitive
markets with varying customer needs and expectations. This has made
them redefine the importance of meticulous planning to be successful in
the globalized environment.
The Importance of Sales Planning:
Better Implementation of Corporate Plans
Provide a Sense of Direction
Focus on Realistic Objectives
Improve Coordination
Facilitate Control
Ensure Healthy Interpersonal Relationships
Reduce uncertainty and risk
Causes of Unsuccessful Sales Planning:
Lack of Awareness or Understanding of Important Aspects
Absence of Proper Planning
Lack of Systematic Communication
Absence of Sales Force Involvement

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Marketing Channels

A marketing channel is a set of interdependent organizations involved in the

process of making a product or service available for use or consumption.
The definition bears some explication. It first points out that a marketing
channel is a set of interdependent organizations.
A) Concept of Marketing Channel:
The concept of a marketing channel is a simple one. There are two
essential parts: the physical distribution structure that moves a product
from the manufacturer to the consumer or user and the marketing
structure that is established as a part of the channel of distribution to
ensure the manufacturer that all marketing objectives are accomplished.
B) Definitions of Marketing Channel:
1) By Dawn Iacobucci:
A marketing channel is a set of interdependent organizations involved
in the process of making a product or service available for use or
consumption.
2) Alice M. Tybout, Bobby J. Calder:
A marketing channel is a set of interdependent organizations involved

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Marketing Channels

C) The Nature of Marketing Channels:

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Marketing Channels

C) The Nature of Marketing Channels:

1) Marketing Channel Concepts:
A marketing channel (also called a channel of distribution) is a group of
individuals and organizations that directs the flow of products from
producers to consumers. The major role of marketing channels is to
make products available at the right time at the right place in the right
quantities.
2) Marketing Channels Create Utility:
Marketing channels create three types of utility: time, place, and
possession.
Time utilitycreated by having products available when the customer
wants them
Place utilitycreated by making products available in locations where
customers wish to purchase them
3) Marketing Channels Facilitate Exchange Efficiencies:
Marketing intermediaries can reduce the costs of exchanges by
efficiently performing certain services or functions. Intermediaries
provide valuable assistance because of their access to, and control
over, important resources used in the proper functioning of marketing
channels.

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Marketing Channels

D) Functions of Marketing Channels:

When managed effectively, the relationships among channel n embers
can also form supply chains that benefits all members of the channel,
including the ultimate consumer.

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Marketing Channels

D) Functions of Marketing Channels:

1) Information Provider:
Middlemen have a role in providing information about the market to
the manufacturer. Developments like changes in customer
demography, psychography, media habits and the entry of a new
competitor or a new brand and changes in customer preferences are
some of the information that all manufacturers want.
2) Price Stability:
Maintaining price stability in the market is another function a
middleman performs. Many a time the middlemen absorb an increase
in the price of the products and continue to charge the customer the
same old price.
3) Promotion:
Promoting the product/s in his territory is another function that
middlemen perform. Many of them design their own sales incentive
programmes, aimed at building customers traffic at the other outlets.
4) Financing:

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Marketing Channels

D) Functions of Marketing Channels:

5) Title:
Most middlemen take the title to the goods, services and trade in their
own name. This helps in diffusing the risks between the manufacturer
and middlemen.
6) Help in Production Function:
The producer can concentrate on the production function leaving the
marketing problem to middlemen who specialize in the profession.
Their services can best utilized for selling the product.
7) Matching Demand and Supply:
The chief function of intermediaries is to assemble the goods from
many producers in such a manner that a customer can affect
purchases with ease. The goal of marketing is the matching of
segments of supply and demand.
8) Pricing:
In pricing a product, the producer should invite the suggestions from
the middlemen who are very close to the ultimate users and know

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Marketing Channels

D) Functions of Marketing Channels:

9) Standardizing Transactions:
Standardizing transactions is another function of marketing channels.
Taking the example of the milk delivery system, the distribution is
standardized throughout the marketing channel so that consumers do
not need to negotiate with the sellers on any aspect, whether it is
price, quantity, method of payment or location of the product.
10)Matching Buyers and Sellers:
The most crucial activity of the marketing channel members is to
match the needs of buyers and sellers. Normally, most sellers do not
know where they can reach potential buyers and similarly, buyers do
not know where they can reach potential sellers.

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Marketing Channels

E) Significance of Marketing Channel:

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Marketing Channels

E) Significance of Marketing Channel:

1) Provide Salesmanship :
Marketing channels also provide salesmanship. In particular they help
in introducing and establishing new products in the market. In many
cases. buyers go by the recommendations of the dealers
2) Provide Distribution Efficiency:
In the first place, the channel brings together the manufacturer and
the user in an economic mama and thereby provides distribution
efficiency to the manufacturer.
3) Help in Price Mechanism:
In many cases, the channels also help implement the price mechanism.
T hey conducts price negotiations with buyers on behalf of the
principals and assists in arriving at the right price the price that is
acceptable to the mater as well as the user.
4) Look after a Part of Physical Distribution and Financing:
Channels also look after a part of the physical Distribution functions
like transportation, handling, warehousing, sub distribution order

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Marketing Channels

E) Significance of Marketing Channel:

5) Assist in Merchandising:
Merchandising is another important function performed by marketing
channels. Through merchandising, they help reinforce the awareness
about the product among customers.
6) Provide Market Intelligence:
Channels provide market intelligence and feedback to the principal. In
the nature of things, channels are in a good position to perform this
task, since they are in constant and direct contact
7) Act as Change Agents and Generate Demand:
In certain cases, the marketing task involves diffusion of some
innovation among consumers. In such cases, the channels go much
beyond the conventional functions of distribution aid act as 'change
agents' among consumers and generate demand for the product.
8) Take Cam of the Flows Involved in Distribution:
The distribution process can be viewed as a series of flows: the
physical flow of products, the title ownership flow, risk flow, the
negotiation flow, the financially payment flow, the information flow and

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Marketing Channels

F) Structure of Marketing Channel:

In conventional marketing systems, businesses can run into conflicts, as
each of the firms in the supply chain aims to maximize its profits on the
expense of the others.
This can subsequently reduce profits for the entire sector.
Vertical and horizontal marketing systems help to address this problem. In
the horizontal marketing system, members at the same level in the supply
chain come together in alliances or joint ventures to pursue a new
marketing opportunity.

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Marketing Channels

F) Structure of Marketing Channel:

1) Vertical Marketing system:
Vertical marketing system (VMS) planned channel system designed to
improve distribution efficiency and cost-effectiveness by integrating
various functions throughout the distribution channel.

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Marketing Channels

F) Structure of Marketing Channel:

1) Vertical Marketing system:
Three Types of Vertical Marketing Systems:
Vertical marketing systems provide one way for businesses to manage
both the costs and logistics of a distribution channel.

a) Corporate System:
A corporate vertical marketing system streamlines the process by
bringing all of the elements of the distribution channel, from
manufacturing to the stores, under the ownership of a single
business.
b) Contractual System:
Under contractual vertical marketing systems, the pieces of the
distribution channel continue to operate as individual entities. The
businesses enter into contractual relationships with other elements
in the distribution channel with their respective obligations and
benefits spelled out ahead of time.
c) Administered System:

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Marketing Channels

F) Structure of Marketing Channel:

2) Horizontal Market Systems (HMS):
Horizontal channel is also termed as symbiotic marketing. This is an
alignment of two or more companies to jointly exploit a marketing
opportunity either by themselves or by creating a third entity. Such a
system has emerged out of mutual advantages. For instance, in India,
cement manufacturing companies have formed an Associated Cement
Company (ACC) So as to channelize their product to the market.
Advantages of HMS:
Employees may attain greater satisfaction in a horizontal structure
due to greater freedom and autonomy.
The use of cross-function teams can also lead to high levels of
cooperation throughout the organization.
The heavy emphasis on innovation can lead to better ideas that keep
the organization ahead of the competition
The absence of multiple structural layers provides streamlined
communication and reporting processes, making the organization
more flexible and adaptable to change.

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Marketing Channels

G) Role of Marketing Channels in the Dynamic Marketplace:

The principle of interspecific competition suggests that channel members
must also fight to achieve competitive advantages. Three outcomes are
possible as a result of inter specific competition. They are:
1) Competitive Superiority:
A particular channel member may emerge as
competitively superior. This superiority can force
rival organisations into extinction as competitors for
limited resources are eliminated.
2) Restrictive Ranges:
The competitive advantages of channel members
may differ across distinctive environmental
conditions. Thus, another possible out-come is that
some organisations prosper in one place while
others flourish in different domains.
3) Character Displacement:
The final possible result is that channel members
rapidly evolve in diverse ways, taking on different
properties to minimise direct competition. This
process is called character displacement.

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Marketing Channels

H) Designing the Market Channel System:

Channel design refers to the development of new channels or the
modification of existing channel structures. A firm can take its products
to the user in various ways. It can use different types of intermediaries; it
can also structure its channel in different ways.
Marketing Channel Design:
Manufacturers have to take several channel decisions. In designing
marketing channels, manufacturers struggle between what is ideal and
what is practical. A new firm with limited capital usually starts by selling
in a limited market area.
For maximum effectiveness, however, channel analysis and decision
making should be more purposeful. Marketing channel design calls for:
Analysing Customer Desired Service Output Level
Establishing objectives and Constraints,
Identifying major channel alternatives and
Evaluating major channel alternatives

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Marketing Channels

H) Designing the Market Channel System:

Steps in Channel Design:
A channel structure consists of types of intermediaries, number of
intermediaries, number of channels, and the terms and conditions of
channel members. Typical channel design involves the following steps:

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Marketing Channels

H) Designing the Market Channel System:

Steps in Channel Design:
1) Step 1: Analysing Customers Desired Service Output:
This first step in designing the channel of distribution is most dynamic
and crucial because customer needs, likes-dislikes, preferences,
behaviors and habits vary from one segment to another. The company
must identify and analyze the expectations of customers from the
outlets in servicing them.
Channels produce five service outputs:
a) Lot Size:
The first service output issue is the lot size that the channel permits
a customer to purchase on every occasion. Many wholesalers buy
larger lots whereas in retail buying, the customer prefers single unit
lot size.
b) Waiting and Delivery Time :
The second service output level is the average waiting time of the
customer. It is the time that the customer has to wait to receive the
desired product from the channel.
c) Spatial Convenience:
Spatial Convenience is the degree to which the marketing channel

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Marketing Channels

H) Designing the Market Channel System:

Steps in Channel Design:
1) Step 1: Analysing Customers Desired Service Output:
d) Product Variety:
The assortment breadth provided by the marketing channel.
Normally, customers prefer a greater assortment because more
choices increase the chance of finding what they need.
e) Service Backup:
The add-on services (credit, delivery, installation, repairs) provided
by the channel. The greater the service backup, the greater the
work provided by the channel.
2) Step 2: Establishing Objectives and Constraints:
Formulation of channel objectives plays an important role while
designing a channel system. The objectives clarify what is sought to
be achieved by having the channels. All firms seek to realize certain
common objectives by having the channel.
3) Step 3: Identifying Major Channel Alternatives:
Companies can choose from a wide variety of channels for reaching

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Marketing Channels

H) Designing the Market Channel System:

Steps in Channel Design:
4) Step 4: Evaluating Major Channel Alternatives:
A channel alternative is described by three elements: the types of
available business intermediaries, the number of intermediaries
needed, and the terms and responsibilities of each channel member. In
this step the marketing manager should evaluate the major channel
alternatives available, on the basis of three criteria Economic criteria
Control criteria
Adaptive criteria

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Marketing Channels

H) Designing the Market Channel System:

Channels for Consumer Goods :
Figure shows the four most common marketing channels for consumer
goods and services. It also shows the number of levels in each marketing
channel, as evidenced by the number of intermediaries between a
producer and ultimate buyers.

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Marketing Channels

H) Designing the Market Channel System:

Channels for Consumer Goods :
1) Direct Channel:
Channel A represents a direct channel because a producer and
ultimate consumers deal directly with each other. Many products and
services are distributed this way. Many insurance companies sell their
financial services using a direct channel and branch sales offices.
2) Indirect Channel:
The remaining three channel forms are indirect channels because
intermediaries are inserted between the producer and consumers and
perform numerous channel functions. Channel B, with a retailer added,
is most common when a retailer is large and can buy in large
quantities from a producer or when the cost of inventory makes it too
expensive to use a wholesaler.

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Marketing Channels

H) Designing the Market Channel System:

Marketing Channels for Industrial Goods:
A channel for industrial goods is a set of interdependent organizations in
the process of making products/services available for use.
The structure of distribution channel for industrial products can be
mentioned as follows:

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Marketing Channels

H) Designing the Market Channel System:

Marketing Channels for Industrial Goods:
1) Zero Level Channel: (Producer.......Industrial User):
In this channel the producers directly sell their products to industrial
users without the help of intermediaries. Large quantity of industrial
goods, big installations machines, costly equipments, raw materials
and important machine parts re directly sold to the industrial users.
2)
One
Level
Channel:
(
Producer.......Industrial
distributor........Industrial user):
Less costly office materials, equipment, operational supplies,
construction materials, spares and parts etc. are sold through industrial
distributors.
3) One Level Channel: (Producer.......Agent........Industrial User):
The other channel to sell industrial goods is one level channel in which
goods are sold to users through agents and not by industrial
distributors.. The producers who need to remain busy in production
cannot contact customers living in different places.
4)
Two
Level
Channel:(Producer......Agent.....Industrial
distributor.....Industrial user):
This is the longest channel for distribution of industrial goods. Two

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Managing Marketing
Channels

Channel managers can use many different policies to administer distribution

systems. Some of these policies restrain or redirect the activities of the
various members of channels and may affect the competitiveness of the
overall market As such, they can fall under legal antitrust scrutiny.
A) Channel Policies:
The main purpose of channel Policies is to catalog a variety of the policies
available for managing channels and explain the reasons why they might
be adopted Second federal antitrust laws.

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Managing Marketing
Channels

A) Channel Policies:
1) Market Coverage Policies:
One of the key elements of channel management is deciding how
many sales outlets should be established in a given geographic area
and what kind of participation in the marketing flows should be
required from each of the outlets so that the needs of existing and
potential customers may be adequately served.
2) Customer Coverage Policies:
Suppliers may wish to set policies regarding customers to whom
wholesalers or retailers may resell their goods and services. For a
variety of reasons, suppliers may wish to reserve certain customers as
house accounts.
3) Product Line Policies:
For a wide variety of logical reasons channel managers may wish to
restrict the breadth or depth of the product lines that their channel
partners sell. Here, we look at the rationale for four policies-exclusive
dealing, tying, full-line forcing, and designated product policies as well
as the antitrust concerns surrounding them.
a) Exclusive Dealing:
Exclusive dealing is the requirement by a seller or lesser that its

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Managing Marketing
Channels

A) Channel Policies:
3) Product Line Policies:
b) Tying:
Tying exists when a seller of a product or service that buyers want
refuses to sell it unless a second ("tied") product or service is also
purchased or at least is not purchased from anyone other than the
seller of the tying product.
c) Full Line Forcing:
One special form of product policy is called full-line forcing. Here a
seller`s leverage with a product is used to force a buyer to purchase
its whole line of goods.
4) Selection and Termination Policies:
A central theme throughout this text is that organizations must devote
a great deal of time, attention, effort, and monetary resources to the
design and management of their distribution systems.
5) Designated Product Policies:
A manufacturer may Wahl to sell some portion of its product line only
through a limited number of resellers, while its other resellers may sell
a different subset of the c0mpany's products.

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Managing Marketing
Channels

B) Organizational Pattern in the Channel:

To deliver service outputs desired by end-users, different channel systems
are developed these are:

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Managing Marketing
Channels

B) Organizational Pattern in the Channel:

1) Conventional (free form) marketing channel:
It consists of independent firms representing manufacturer,
wholesalers, and retailers. each seeks to maximise own profits. no
member has control over other channel members. Channel members
bargained over each transaction.
2) Vertical integration / vertical marketing system (vms):
To improve effectiveness & efficiency of free form/conventional mkt.
channel, vertical marketing system (vms) has emerged. it is a unified
system in which one member, the channel leader, owns others or has
so much power that others cooperate, behave better, & have less
conflict.
3) Horizontal Marketing System:
In this channel two or more unrelated companies join together, so as to
have pooled resources to exploit an emerging marketing opportunity.
This system takes place when a company lacks capital and the
knowhow of production and/or marketing resources and is afraid of
taking risks or venturing out alone.
4) Multi Channel Marketing Systems:
In the past, many companies sold to a market through a single

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Managing Marketing
Channels

C) Assessing Channel Performance:

The performance of a channel can be measured across multiple
dimensions. The parameters that are measured usually are effectiveness,
efficiency, productivity, equity and profitability of the channel.
While channel efficiency emphasizes controlling costs incurred by
intermediaries while performing channel functions, channel productivity is
concerned with maximizing outputs for a given level of inputs.
Channel effectiveness deals with the intermediary's proficiency in
satisfying customer needs and channel equity measures the distribution
of accessibility of the channel among customers.

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Managing Marketing
Channels

C) Channel Conflict:
Channel conflict is a situation in which channel partners have to compete
against one another or the vendor's internal sales department. Channel
conflict can cost a company and its partners money as partners try to
undercut one another.
Concept:
Channel conflict is a clash of goals and methods between distribution
channel members. It may be either horizontal conflict between channel
members of the same level or vertical conflict between channel members
of different levels.
Types of Channel Conflict:
There are three types of channel conflicts, namely latent conflict,
perceived conflict, and felt conflict.

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Managing Marketing
Channels

C) Channel Conflict:
Types of Channel Conflict:
1) Latent conflict:
Latent conflict is a conflict of interest of channel member with the
other or its principal. It is at such a low level that channel members do
not fully sense it.
2) Perceived conflict:
Perceived conflict is the one in which a channel member perceives
some sort of opposition such as opposition to viewpoint, sentiments, or
intentions and so on.
3) Felt conflict:
Felt conflict is emotional in nature and is said to occur when
organization members experience negative emotions, such as tension,
anxiety, anger, frustration and, hostility. In such a conflict, organization
members personalize their differences.

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Managing Marketing
Channels

C) Channel Conflict:
Causes for Channel Conflict:
Causes of conflict may be varied; we shall see commonly occurring
causes for channel conflict:

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Managing Marketing
Channels

C) Channel Conflict:
Causes for Channel Conflict:
1) Encroachment of Territories:
Many times the coverage of geographical areas is not defined properly,
e.g., Shinoli is a place in Kolhapur district of Maharashtra state;
however, it is very close to a city from Karnataka-Belgaum.
2) Lack of Support by the Company:
Channel partners need a lot of support from the principals, say by way
of joint visits or technical convincing of customer, faster deliveries,
warranty replacements and service, etc. In case there is a sustained
laxity, conflict is unavoidable.
3) Inadequate Compensation Rates:
Initially channel partners may accept compensation rates as offered to
them; but later they learn that the actual cost of pushing that product
is high and therefore the compensation is not lucrative, e.g. a dealer
based in a geographical territory was offered a commission rate of 25%
which was higher than what was offered by competing makes, which
was higher than what was offered by competing makes.

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C) Channel Conflict:
Causes for Channel Conflict:
4) Differential Compensation Rates:
Some companies offer differential compensation rates to its channel
members. This differentiation may be due to high sales volume
achieved by a particular dealer.
5) Inadequate Reimbursement of Promotional Expenses in Case
of Cooperative Promotion:
Channel partners may be asked to spend an amount which in reality may
be high, e.g., a channel partner whose annual revenue is lower and he
thus cannot afford to spend beyond a certain amount is likely to resist
spending such amounts as may be desired by the principal.
6) Inadequate Compensation for any Extra Effort:
Sometimes a channel partner is called upon to assist the principal in its
task and promised certain compensation. For the amount of work done,
the channel partner may feel he is underpaid and feel dissatisfied.

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C) Channel Conflict:
Mechanisms for preventing conflict escalation:
There are three mechanisms available for preventing any conflict from
escalation.
They are:
1) Information-intensive
mechanisms:
These consist of joint groups to deal with
conflicts,
exchange
of
persons,
i.e.,
manufacturers representatives working with
representatives of the middleman, and top
management staff meeting with channel
partners regularly.

2) Third party mechanisms:

These provide for involving independent
parties as arbitrators or mediators to resolve
the conflict.
3) Building relational norms:
Norms are expectations of behavior of
channel members. A channel with strong
relational norms refrains from protecting its

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D) Channel Information system:

The efficiency and effectiveness of any marketing channel depend very
much on the collection, creation, management and communication of
information. Channel Information system (CIS) are basically used to
collect, store and interpret information in a manner that adds value to an
organizations functions.
Concept:
Information is data that has been processed into a form that is
meaningful to the recipient and is of real or perceived value in current or
prospective actions or decisions.
Purpose of Channel Information System:
Channel information systems provide timely information for decisionmaking.
Operational data is the basis for planning the channel and evaluating
the performance of the channel.
Operational planning includes forecasting and providing the resources
to achieve the forecast.
Evaluation is concerned with reviewing the results achieved and to

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D) Channel Information system:

Elements of Channel Information System:
Two major components of a channel information system are:
The hardware and networks making up the technological housing of the
information system.
The database of information itself.