n reality, managing conflict is animperative in a soft market. Channelsare more sensitive to conflict becauseof the perceived impact on their

bottom line. Therefore, they are quick to act tomanage the conflictwhich usually means lessemphasis on the guilty brand. Few manufacturerscan afford the loss in effective market coveragethat this unilateral channel decision can result in.Thus, the need for the manufacturer to proactivelyaddress the issue.

Multichannel systems are a way of life for manu-facturers today. Whether you are managing a mixof direct and indirect channels or a spectrum ofhigh-support to low-support resellers, the reality isthat channel conflict will be an ongoing issue inyour marketplace. As the number of internet sites(potentially including your own) that offer yourproduct for sale proliferates, this multi-channelstructure becomes more complex and the channelconflict potential more pervasive.

A limited amount of channel conflict is healthy.It indicates that you have adequate market coverage.However, once the balance between coverage andconflict is lost, destructive channel conflict canquickly undermine your channel strategy, marketposition and product line profitability.

Conflict can show up in the market in a variety ofways. A point of confusion for many manufacturersis whether problems are truly symptoms of destructive

channel conflict or other marketing or channel strategyissues. When faced with potential indicators ofdestructive conflict, you should audit your marketposition to identify the true cause and then quicklyact to address it.

Channel conflict is managed by a combinationof economics and controls. Economic solutionscompensate channels fairly for functions performedand help direct channels away from actions thatcreate destructive conflict. Controls put structurearound a channel strategy to limit the potential forundue destructive conflict.

Channel conflict can bedefined as any scenariowhere two differentchannels compete for thesame sale with the samebrand. Conflict can takethe form of a direct salesforce competing with anindependent distributor,two different types ofcompeting distributors,two like distributorscompeting for the samesale, or all of theabove.

In this issue of the ClientCommuniqu, we discussthe challenge of escalatingchannel conflict that oftendevelops in difficult eco-nomics times. We outlinedifferent types of channelconflict, ways to recognizedestructive conflict andproven methods to resolveconflict and preserve marketshare. We include severalkey questions to consider asa simple self audit of chan-nel conflict in your market.

We also examine the need torestructure sales resourcesand still ensure the organi-zation can execute effective-ly in the market. Finally, weoffer a variety of revenueproducing or cost cuttingideas that can be highly pro-ductive even when marketconstraints are high.

continued Carl Cullotta