CHANNEL CONFLICT
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
manufacturer’s brands.
• Intermediaries encourage customers to
switch to private labels / competitive
products.
• Intermediaries carry competing lines
and give more showroom space.
• No support in the manufacturer’s
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 manufacturer’s 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 manufacturer’s 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
member’s 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.
