Sdm ch13
- 1. Chapter 13 Channel Management SDM- Ch 13 Tata McGraw Hill 1
- 2. Learning Objectives • 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 SDM- Ch 13 Tata McGraw Hill 2
- 3. Channel Management • Is in three broad phases: – Use of power bases – Identifying and resolving channel conflicts – Channel co-ordination Use of power…. SDM- Ch 13 Tata McGraw Hill 3
- 4. 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 SDM- Ch 13 Tata McGraw Hill 4
- 5. 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. SDM- Ch 13 Tata McGraw Hill 5
- 6. French & Raven “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 performers only • Competition – created between channel partners Countervailing power…… SDM- Ch 13 Tata McGraw Hill 6
- 7. Countervailing Power • Balances the power exerted by one channel member. It is not a one-sided equation. • Both the channel member and the principal can have influence on each other. • Results from interdependence within the channel system. – Company exerts power on the distributor to get its coverage and revenues Examples – Distributor has enough influence on his customers and this is critical for the company also – Weaker partners do get exploited – ancillary units SDM- Ch 13 Tata McGraw Hill Co-ordination… 7
- 8. Channel Co-ordination • Channel system is well co-ordinated if each member understands his role correctly and performs it to help the system achieve its 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…. SDM- Ch 13 Tata McGraw Hill 8
- 9. 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 SDM- Ch 13 Tata McGraw Hill 9
- 10. Channel Conflict CONFLICT GOAL DOMAIN PERCEPTION SDM- Ch 13 Tata McGraw Hill 10
- 11. Channel Conflict • Situation of discord or disagreement between partners in the same channel system – has negative connotations and is driven more by feelings than facts • Conflict is part of any social system – getting disparate entities to work together as in a 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 SDM- Ch 13 Tata McGraw Hill 11
- 12. 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…. SDM- Ch 13 Tata McGraw Hill 12
- 13. Four Stages LATENT PERCEIVED FELT MANIFEST Each stage is progressively more severe than the earlier one SDM- Ch 13 Tata McGraw Hill 13
- 14. Types of Conflicts • Latent Conflict: – Some amount of discord exists but does not affect the working or delivery of customer service objectives. – Disagreement could be on roles, expectations, perceptions, communication. • Perceived Conflict: – Discords become noticeable – channel partners are aware of the opposition. – Channel members take the situation in their stride and go about their normal business – No cause for worry but the opposition has to be recognized SDM- Ch 13 Tata McGraw Hill 14
- 15. Types of Conflicts • Felt Conflict: – Reaching the stage of worry, concern and alarm. Also known as ‘affective’ conflict. – Parties are trying to outsmart each other. – Causes could be economical or personal – Needs to be managed effectively and not allowed to escalate. • Manifest Conflict: – Reflects open antagonistic behaviour of channel partners. Confrontation results. – Initiatives taken are openly opposed affecting the performance of the channel system. – May require outside intervention to resolve SDM- Ch 13 Tata McGraw Hill 15
- 16. 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 SDM- Ch 13 Tata McGraw Hill 16
- 17. 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…. SDM- Ch 13 Tata McGraw Hill 17
- 18. Resolving Conflicts A 4 Stage Process Understanding nature and intensity Tracing the source of the conflict Understand the impact of the conflict Strategy and plan of action for resolution SDM- Ch 13 Tata McGraw Hill 18
- 19. Conflict Resolution Styles Avoidance Styles are a combination of assertiveness and Aggression co-operation. Accommodation Compromise Collaboration Least effort and Maximum effort and results Best results SDM- Ch 13 Tata McGraw Hill 19 Kenneth W Thomas
- 20. Avoidance • Used by weak channel members. • Problem is postponed or discussion avoided. • Relationships are not of much importance. • As there is no serious effort on getting anything done, conflict is avoided. SDM- Ch 13 Tata McGraw Hill 20
- 21. 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. SDM- Ch 13 Tata McGraw Hill 21
- 22. 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 SDM- Ch 13 Tata McGraw Hill 22
- 23. Compromise • Obviously both sides have to give up something to meet mid way. • Can only work with small and not so serious conflicts. • Used often in the earlier two stages. SDM- Ch 13 Tata McGraw Hill 23
- 24. 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- win approach • Requires a lot of time and effort to succeed. • Sensitive information may have to be shared SDM- Ch 13 Tata McGraw Hill 24
- 25. Channel Policies • Defines how the channel is required to operate. • Normally framed by the channel principal to guide the operations of the channel system • If not framed properly could prove the starting point of channel conflicts. • Some subjects of channel policies could be as seen in the next slide: SDM- Ch 13 Tata McGraw Hill 25
- 26. Channel Policies • Markets to be covered • Customer coverage • Pricing • Product portfolio to be handled • Selection, termination of channel members • Ownership of the channel SDM- Ch 13 Tata McGraw Hill 26
- 27. 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 SDM- Ch 13 Tata McGraw Hill 27
- 28. 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. SDM- Ch 13 Tata McGraw Hill 28
- 29. 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 SDM- Ch 13 Tata McGraw Hill 29
- 30. 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 SDM- Ch 13 Tata McGraw Hill 30
- 31. Key Learnings • Channel conflicts are resolved by joint membership of associations, exchanging personnel or arbitration • 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. SDM- Ch 13 Tata McGraw Hill 31