Channel Conflicts

CHANNEL CONFLICT
By:
Prof.(Dr.) J.R.Das
SOA University
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.
• 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.
• “Channel conflict arises when the behavior of
a channel member is in opposition, to its
channel counterpart. It is opponent centered
and direct, in which the goal or object sought
is controlled by the counterpart.”
Coughlan, Anderson,
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.
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.
• 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.
• 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.
Vertical Channel Conflict
Horizontal Channel Conflict:-
Multi Channel Conflict:-
Example:-
Example:- Exclusive Company
Online Store Like e- Outlet
bay
Four Stages of conflict
LATENT
PERCEIVED
FELT
MANIFEST
Each stage is progressively more severe than the earlier one.

Stages 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.
Stages 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.
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

Conflict Resolution Styles
Avoidance Styles are a combination

of assertiveness and
co-operation.
Aggression
Accommodation
Compromise
Collaboration
Least effort and Maximum effort and

results Best results
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.
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.
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.

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.

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.

Power in Marketing
Channels
Power Defined:
The capacity of one channel
member to get another channel
member to do something that he
otherwise would not have done.
Role in Marketing Channels
Role Defined:
Set Prescriptions defining what the
behavior of a position member
should be.
Communication in Marketing
Channels
Communication Defined:
Flow of information that enables
channel members to send and
receive messages
Managing conflict or conflict
management strategies
• Arbitration and mediation
• Communication
• Channel captain
• Bargaining strategy
• Super ordinate goals
• Dealer councils

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CHANNEL CONFLICT

Each stage is progressively more severe than the earlier one.

Understanding nature and intensity

Tracing the source of the conflict

Understand the impact of the conflict

Strategy and plan of action for resolution

Avoidance Styles are a combination

Least effort and Maximum effort and

Problem is postponed or discussion avoided.

Relationships are not of much importance.

As there is no serious effort on getting

It means being concerned about one’s own goals

The dominating channel partner (may be the

One party helps the other achieve its goals without

Emphasis is on full co-operation and flexibility in

If not handled properly, can result in exploitation.

Obviously both sides have to give up

Can only work with small and not so serious

Used often in the earlier two stages.

Tries to maximize the benefit to both parties while

Most ideal style of conflict resolution – a win-win

Requires a lot of time and effort to succeed.

Sensitive information may have to be shared.

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