managing conflict to increase channel coordination
TRANSCRIPT
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Managing Conflict to increase channel coordination
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What is Conflict
• Channel conflict is behavior by a channel member that is opposition to its channel counterpart. It is opponent centered and direct, in which the goal or object sought is controlled the counterpart.
• Conflict is a process that begins when one party(A) perceives that another party(B) has negatively affected, or is about to negatively affect, something that one of the parties cares about
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Type of Conflict
1.Vertical level Conflict: is the conflict between the higher and lower level channels i.e. between the wholesaler and manufacturer.
2. Horizontal level Conflict: between the same level of channel members i.e. between the same retailers on the issue of price and territory jumping.
3. Multi level Conflict: is when the middleman comes in conflict with the manufacturer using both direct and indirect means of distribution.
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Forms of Conflict
• 1. Latent conflict ( phase of anticipation)
• 2.Perceived conflict ( indicates cognitive awareness of stressful situation).
• 3.Overt conflict (that is openly visible and not concealed )
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Measuring Conflict
• 1.Counting up the issues.
• 2.Importance.
• 3.Frequency of disagreement.
• 4.Intensity of dispute.
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Functional Conflict
• Communicate more frequently and effectively.
• Establish outlets for expressing their grievances.
• Critically review their past actions.
• Devise and implement a more equitable split of system resources
• Develop a more balanced distribution of power in their relationship.
• Develop standardized ways to deal with future conflict and keep within bounds.
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Approaches to Conflict
Win/LoseWin/Lose One party gets One party gets satisfactionsatisfaction
Lose/WinLose/Win The other party The other party gets satisfactiongets satisfaction
Lose/LoseLose/Lose Neither party Neither party gets satisfactiongets satisfaction
Win/WinWin/Win Both parties feel Both parties feel satisfiedsatisfied
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Competing Goals
Manufacturer Reseller
Higher margin for self Higher margin for self
Higher price to reseller Lower price to reseller
Lower price to end-user Higher price to end-user
Reseller holding more inventory
Reseller holding less inventory
No allowances More allowances
Increase unit sales Increase unit sales
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Perceptual Conflict
• Inaccurate expectations of actions of the other
• Differing perceptions at even very basic levels
• Differing judgment
• Different focus• Manufacturer: own processes and product
• Reseller: own processes and customers
• Lack of communication
• Different cultures
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Financial Goals
Supplier viewpoint Reseller viewpoint Expression of clash
Maximize own profit by:
•Higher prices to reseller.
•Higher sales by reseller.
•Higher reseller expenses.
•Higher reseller inventory.
•Lower allowances to reseller.
Maximize own profit by:•Higher own-level margins (lower prices from our supplier and higher prices to our customer)•Lower expenses.(less support)•Faster inventory turnover .(lower reseller stocks)•Higher allowances from manufacturers.
Supplier: you don’t put enough effort behind my brand. Your prices are too high
Reseller: you don’t support me enough. With your wholesale prices , we can’t make money.
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Desired target Accounts
Supplier focus on Reseller focus on Expression of clash
•Multiple segments
•Multiple markets
•Many accounts(raise volume and share)
•Segment corresponding to resellers’ positioning (e.g.; discounter)
•Our markets only
•Selected accounts(those that are profitable to serve)
Supplier: we need more coverage and more effort. Our reseller doesn’t do enough for us.
Reseller: you don’t respect our marketing strategy. we need to make money too.
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Desired product and
Accounts Policy
Supplier focus on Reseller focus on Expression of clash
•Concentrate on our product category and our brand.
•Carry out full line (a variation for every conceivable need, plus our effort to expand our line outside our traditional strengths)
•Achieve economic of scope over product categories.
•Serve customer by offering brand assortment.
•Don’t carry inferior or slow-moving items (every supplier has of these).
Supplier: you carry too many lines. You don’t give us enough attention.You ‘’re disloyal.
Reseller: our customers come first . If we satisfy our customers , you will benefit. By the way, shouldn’t you consider pruning your product line ?
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Domain Conflict
• Responsibility for flows and functions
• Market domains• Intra-channel conflict
• Upstream point of view
• Downstream point of view
• Multiple channels
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Domain Conflict
• Multiple channels• Now very common
– Heightened competition
– Fragmented markets
– Technology allows management of more channels
• Suppliers like multiple channels
• Customers like multiple channels
• Resellers don’t like multiple channels– Free-riding
– Customers do not stay within their intended channels
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• Is it really a problem?
• What suppliers can do?
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Gray Markets
• Selling authorized goods through an unauthorized channel
• Occur when:• Differential pricing to different channel members
• Pricing differently to different geographic markets
• Domestic products are sold through high-service
• Effects• Manufacturer cannot effectively sell at different prices in different
markets
• Erodes potential volume for authorized dealers who may also provide after-sales service
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Gray Markets
• Growing quickly
• Often tolerated• Violations difficult to detect
• Gray markets sometimes give more category exclusivity
• Costs of taking action against gray markets often more than the benefits
• Manufacturer gets greater market coverage
• May be an intended channel
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Oakley Case
• Oakley is a California-based manufacturer of high design premium priced sunglasses.
• It’s the biggest distribution channel customer in sunglass hut.
• A prominent retail chain that offers excellent coverage of malls, airports, business districts
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In August 2001: Sunglass Hut was purchased by Luxottica Group.
Luxottica makes many of Oakley’s competitors like
Ray Ban.
The chain excels at converting lookers into buyers & finding those prospects who are willing to pay a high price for design and innovation in highly competitive product category.
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• Oakley eyeglass wearers were contacted by Mail & Web,
Which makes salespeople were more interested in their commissions than in the customer’s best interests.
• Oakley launched a program to cultivate other retailers which designed to drive the traffic to deferent stores.
The main idea is to increase the percentage of sales that will be Luxottica brands
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• Oakley convinced sport stores
(Such as Champs and foot Locker)
and department stores
(Such as Nordstorm)
To open and enlarge sunglass counters and even Oakley corners (boutiques).
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• Oakley successfully secured a restraining order.
• In 2003: it acquired OPSM ,
which is a prominent Australian-based sunglass retailer in Asia.
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•How destructive actions impact dealers ?
•First, what is the meaning of Dealers ?
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• How dealers react to such destructive actions shows that quite different reactions are common:
Passive acceptance
Venting
Neglecting the supplier
Threatening to resign the line
Engaging the supplier in constructive discussion
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• Conflict Resolution Strategies:
• How they drive conflict and shape channel performance ?
• We can distinguish two approaches
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References
• Book: Marketing Channels. Seventh Edition
• http://www.acs.org.au/governance/LWarne-ACIS97.html
• http://www.ehow.com/about_6807573_definition-literary-conflict.html
• http://en.wikipedia.org/wiki/Protracted_social_conflict
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Thank you for Listening