Marketing bán hàng - Chapter 13: Channel management

Chapter 13Channel Management1Learning ObjectivesUnderstand how and why channel conflicts occurLook at ways of managing conflictChannel practices followed to resolve conflictsPrinciples of channel managementVarious parameters on channel policyWay in which services use marketing channelsSDM- Ch 132Tata McGraw Hill PublishingChannel ManagementIs in three broad phases:Use of power basesIdentifying and resolving channel conflictsChannel co-ordinationUse of power.SDM- Ch 133Tata McGraw Hill PublishingUse of Power BasesChannel system has a set of players:Not equally motivated to implement the ideal channel designWhose expectations from the system differUse of the 5 power bases brings diverse channel partners in line for effective implementation5 power bases are: reward, coercion, legitimate, expert and referent (French & Raven)Two more power bases in the Indian context are support and competitionSDM- Ch 134Tata McGraw Hill PublishingUse of Channel PowerChannel 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 135Tata McGraw Hill Publishing“Power” of MotivationReward – incentives for good performanceCoercion – threat of punishment for non-performanceReferent – benefit of sheer association with a strong companyLegitimate – arising out of a contractExpert – specialized knowledgeSupport – additional benefits for better performers onlyCompetition – created between channel partners French & RavenCountervailing powerSDM- Ch 136Tata McGraw Hill PublishingCountervailing PowerBalances 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 revenuesDistributor has enough influence on his customers and this is critical for the company alsoWeaker partners do get exploited – ancillary units Co-ordinationExamplesSDM- Ch 137Tata McGraw Hill PublishingChannel Co-ordinationChannel 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 protectedActions of all are in line with overall objectivesFlows are streamlined to desired customer service objectivesChannel co-ordination is an on-going effortConflict.SDM- Ch 138Tata McGraw Hill PublishingChannel ConflictsConflict is generated when actions of any channel member come in the way of the system achieving its objectivesThree broad categories of channel conflict are:Goal conflict – understanding of objectives by various channel members is differentDomain conflict – understand responsibilities and authority differentlyPerception conflict – reading of the market place is different and proposed actions varySDM- Ch 139Tata McGraw Hill PublishingChannel ConflictCONFLICTDOMAINPERCEPTIONGOALSDM- Ch 1310Tata McGraw Hill PublishingChannel ConflictSituation of discord or disagreement between partners in the same channel system – has negative connotations and is driven more by feelings than factsConflict 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 resultsSDM- Ch 1311Tata McGraw Hill PublishingConflicts Result FromEach channel member wanting to pursue his own goalsEach wants to retain his independenceThere are limited resources which all of them want to utilise in achieving their goalsFeatures of conflicts:Initially latent and does not affect the workingIs not normally possible to detect till it becomes disruptive Four stages.SDM- Ch 1312Tata McGraw Hill PublishingFour StagesLATENTMANIFESTFELTPERCEIVEDEach stage is progressively more severe than the earlier oneSDM- Ch 1313Tata McGraw Hill PublishingTypes of ConflictsLatent 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 recognizedSDM- Ch 1314Tata McGraw Hill PublishingTypes of ConflictsFelt 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 personalNeeds 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 resolveSDM- Ch 1315Tata McGraw Hill PublishingReasons for Channel ConflictRoles not defined properlyAllocation of scarce resources between members seem unfair to someDifferences in perception of the business environmentSDM- Ch 1316Tata McGraw Hill PublishingReasons for Channel ConflictFuture expectations not likely to materializeDecision domain disagreements – who has to decide on what (key account pricing)Channel members do not agree on objectivesMisunderstanding or mis-interpretation of routine business communicationResolving.SDM- Ch 1317Tata McGraw Hill PublishingResolving ConflictsUnderstanding nature and intensityStrategy and plan of action for resolutionUnderstand the impact of the conflictTracing the source of the conflictA 4 Stage ProcessSDM- Ch 1318Tata McGraw Hill PublishingConflict Resolution StylesAvoidance AggressionAccommodationCompromiseCollaborationLeast effort and resultsMaximum effort and Best resultsKenneth W ThomasStyles are a combinationof assertiveness andco-operation. SDM- Ch 1319Tata McGraw Hill PublishingAvoidanceUsed 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 1320Tata McGraw Hill PublishingAggression 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 1321Tata McGraw Hill PublishingAccommodationA 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 exploitationSDM- Ch 1322Tata McGraw Hill PublishingCompromise 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 1323Tata McGraw Hill PublishingCollaborationAlso known as a problem solving approachTries to maximize the benefit to both parties while solving the dispute.Most ideal style of conflict resolution – a win-win approachRequires a lot of time and effort to succeed.Sensitive information may have to be sharedSDM- Ch 1324Tata McGraw Hill PublishingChannel Policies Defines how the channel is required to operate.Normally framed by the channel principal to guide the operations of the channel systemIf 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 1325Tata McGraw Hill PublishingChannel Policies Markets to be coveredCustomer coveragePricing Product portfolio to be handledSelection, termination of channel membersOwnership of the channel SDM- Ch 1326Tata McGraw Hill PublishingThe Services SectorTwice the size of the manufacturing sectorServices offered are to be in line with customer demandServices have to be presented in an appealing manner to sustain customers.Needs specialized channels which understand the characteristics of service deliverySDM- Ch 1327Tata McGraw Hill Publishing5 Characteristics of ServicesThey are intangible – can only be felt. No visual features like size, style.They are inseparable from their service providers – a 3P cannot deliverThey cannot be standardized – custom made and deliveredCustomers are involved to a great degree – define the servicesThey are perishable – cannot be stored for delivery later. Salvage value of an unsold service is zero. SDM- Ch 1328Tata McGraw Hill PublishingChannels UsedShorter channels than for productsSome channels used are:Direct from service provider to userAgents or brokers to bring buyer and seller togetherFranchisees or contractorsElectronic channelsHigh degree of customization is providedSDM- Ch 1329Tata McGraw Hill PublishingKey LearningsChannel management is done by: use of power bases, identifying and resolving channel conflicts and co-ordinationChannel conflicts could occur due to: goal conflicts, domain conflicts and perception conflictsChannel 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 1330Tata McGraw Hill PublishingKey LearningsChannel conflicts are resolved by joint membership of associations, exchanging personnel or arbitrationChannel management involves the four steps of planning, organisation structure, control of the channels and measuring performance for continuous improvementServices 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 1331Tata McGraw Hill Publishing