Distribution & Channel

Management

M. Ekhlaque Ahmed
Khalid Hussain
 PART A
Marketing & Sales Leadership
Excellence in Demand Generation Process

Marketing Strategy

People Capability/
Marketing Leadership Marketing
Intelligence

Marketing Planning

Brand Positioning Pricing

Product Portfolio Distribution Strategy
Communication Market Introduction

Sales & Account Management

 LEADERSHIP COMPETENCY MODEL
TASK
Shows determination to Show a drive for results..
achieve excellent results Sets demanding and visionary
goals.
Takes active ownership/
accountability
Focuses on the market Uses business knowledge to add
value.
Shows customer insight
Thinks strategically
Finds better way Manages systems and process
effectively.
Manages profitability.
Champions change.
 LEADERSHIP COMPETENCY MODEL
PEOPLE
Demand top performance Leads by example
Provides direction
Tackles performance issues
Inspire commitment Communicates and influences
effectively
Builds relationship and fosters
teamwork
Motivates others
Develops self and others Coaches and develops others
Develops oneself
Stimulates learning and manages
knowledge
 PART B
Distribution Channels
Key Concepts
 Distribution Definitions
Distribution Channels: A Definition (Fact)

A Channel of distribution is the group of organizations

(channel members) involved in performing the tasks which
move a product from the point of manufacture to the point
of sale

Distribution Channel Management:

A Definition (Challenge)

Channel Management involves the processes of leading,

planning, coordinating & motivating channel members in an
environment of partnership/relationship
Marketing Channel Defined
The external contractual organization that management operates to
achieve its distribution objectives

External
Channel exists outside the firm
Inter organization management

Contractual Organization
Refers to those firms or parties who are involved in negotiators
functions I.E, Buying, Selling & transferring title of goods

Operates
1. Involvement of management in the affairs of channel
2. From initial channel structure to Day to Day Management
3. Control on channel to what extent
 STRATEGIES FOR WINNING
DISTRIBUTOR PREFERENCE
Low Market Power Building High

Low
Suicide Pull
Strategy Strategy
Distributor
Relation
Building
Push Win- Win
Strategy Strategy

High
 Market Power Drivers
Customer value
Superior image
Market leadership
Product superiority
Service superiority
Valued uniqueness
Fast speed of action
Ongoing value innovation
 Distributor Relations Drivers

Partnership Focus
Relationships building
Conflict containment
Product and service fit
Dealer cost driving
Help in crisis
Information & technology Linkage
Order handling effectiveness
Dealer promotions & Merchandising
Forward linkage creation
 PART C
Marketing Channel Significance
 Marketing Channel Importance

1. Greater Difficulty of Gaining a Sustainable

Competitive Advantage
CA is a competitive Edge that cannot be easily
copied
CA thru product ,Price & Promotion becoming
difficult
Rapid technology transfer marking it easier to
achieve parity in product strategy
Gaining CA VIA Pricing strategy is even less
feasible
Channel effectiveness can create sustainable
Competitive advantage.
Three Reasons:
1. Long Term
2. Requires Structure
3. Relationship and People
Long Term
Thru Strategic Partnership
Barrier of entry for competition
Requires Structure
Of Organization And People
Dealers, Distributors, Agents, Retailers
Coverage, Shelf Share
 Relations & People
The success of channel strategy & the
structure that supports it are dependent on
how effectively people in various organization
relate to each other in performing their jobs
(FIT)
2. Growing Power Of Distributors
Shift from producers of goods to distribution of
goods
Specially on retail level where giant mass
Merchandisers have become Dominant Players
They control access to market place
 For manufactures they are gatekeepers into
consumer markets
As gatekeeper they act as buying agent for their
consumers rather than selling agents for marketers
Operate on low margin/ low price sophisticated
marketers / fierce competitors that make tough
demands on manufactures
3. Need to Reduce Distribution costs
Massive effort to squeeze out cost is now being
extended to marketing channels
In order to reduce the costs of distribution, firms
will need to focus much more attention on channel
structure / management.
4. New stress on Growth
Limits reached in cost cutting / downsizing
as the basis for enhancing the bottom line
Growth / faster revenue need to augment the
cost cutting efforts
Taking competition share
5. Increasing Role of Technology
Keeping an eye on electronic marketing
channels.
Using it as a tool to improve channel
management.
 Formula For increasing Market Share

Market share = Your Sales

Market (total) sales
Market share= outlet coverage * Shelf Share
Increasing market share should focus on improving
outlet coverage or shelf share or both at a certain
level of Brand Franchise
Brand Franchise can be measured from Shelf
Share (A quantitative Measure of brand managers
marketing efforts)
 PART D
Goods Flow & Key Channel Players
 Moment of Truth

First Moment of Truth (FMOT)

Second Moment of Truth (SMOT)

YOU WILL NEVER WIN THE SECOND MOMENT OF TRUTH IF YOU

CANT WIN THE FIRST ONE.
Channel Strategy

The right channel strategy would be to

meet specific shopper needs by offering:
The right products

With the most effective

promotions

At the right price

In the right location

With the right communication

 Channel Mapping
Level 1 Level 2 Level 3

1.1.1 Cash & Carry

1.1.2 Hyper Market
1.1 Key Accounts 1.1.3 Super Market
1. Planned Shopping
1.2 Large Groceries 1.2.1 Self service stores
1.2.2 Counter stores

2.1 Small Stores

2. Ad Hoc 2.1.1 Small General stores
2.2 Petromarts
Convenience 2.1.2 Kiryana Stores
2.3 Tobacco Kiosks

3.1.1 Chains
3.1 Bakery 3.1.2 Fragmented
3. Specialty Food &
Drink shopping 3.2 Pharmacy
3.2.1 Chains
3.2.2 Fragmented

4. Non Outlet business 4.1 Wholesale

Partners
 Good Flow Chart
Company

3rd Party
distributors Direct Sub Handling
Distributor Distributor Agent

Sales channel Retail

Channel
Food Service

Super Markets/
Convenience Khokha
Panshop

Key Accounts
Sundry Outlets
Office / Factories
Sales channel 3rd Party Canteen /
categorization General Store Operator
ATCS
Karyana Store Vendors
Medical Store Hotels / Restaurant
Wholesale Bakery Transport Business
 GOODS FLOW
Factory
Stock at Market Place
Distribution center
Turnover Speed/Daily-Hrly Billing
Opportunity Sales
Stockists Increase Profit to Trade
Invoicing Lahore / Wazirabad,
Stockiest Multan, Pindi,
Sukkur/Okara Hyderabad, Faisalabad

W/S Distributor Mobile Distributors

Wholesalers
Retailers Doorstep
Sub-Wholesale
Delivery With a
Route Plan
Retailers
 Route to Market
Distribution
Channel

Direct Distributors

Sub-Distributors
Handling Distributors

Company Warehouses

Modern Trade Retailers/Wholesalers/C & C

 Definition
Large Groceries:
Outlets of class A & B with high
turnover and potential for growth
Some items are accessible from
open shelves
Sell local as well as imported
products and deal mainly in packed
food
Drug items have to be asked from
behind the counter

Small Stores (counter Stores):

Small Stores are outlets of class C &
D that cannot be walked into by
shopper
Sell packaged food and beverages
They have high potential for growth
through promotional and display
activities of the relevant product.
 Definition
Small Stores (Kiryana
Stores):
These are small stores of class C & D
Primarily sell non-packed ingredients for
food preparation e.g. herbs, spices, rice,
flour etc
Items can be bought in lowest possible
quantities

Bakery:
Main focus is on selling cakes, sweets,
bread and pastry items
Specializes in making cakes
Also sell packed food items

Pharmacies:
Primarily sell medicines and infant
dietetics
Also sell toiletries and other packed food
items
 Definition
Petromarts:
These are convenience stores
located at petrol pumps
Sell packed food and non food
items along with tobacco, bakery
items, snacks and beverages
Open late at night.

Tobacco Kiosks:
A permanent or temporary
structure that cannot be walked
into by shopper
Primary focus on selling Tobacco,
pan & beverages
Sell selective range of
confectionary
 STOCKING POINTS

Rented warehouses, strategically located

all over Pakistan, managed by third
parties on fixed remuneration, carries
Company owned stock. Primarily to
ensure stock availability close to market /
customers.
 RETAIL DISTRIBUTION

STOCK AT / NEAR MARKET PLACE

TO ACHIEVE

Turnover speed
Low investment in stock, high investment
in market
Low per unit Profit, but High on volume
High ROI
 Direct Distributor

A third party
Distributes companys products within a defined
geographical territory
Buys directly from the company on cash / credit basis and
uses his infrastructural and work force to sell them out in
the market
Provides separate set up for the company
Does not distribute competitors brands
Sells to retail outlets as per route structure, required
frequency
Methods: spot selling / order booking, collection and
supply method
 Functions of Distributor
Availability of product range in each and every
listed outlet in his allocated area of distribution
Merchandising
Warehousing and maintain adequate number of
vehicles for efficient distribution
Stock cover (back up stock) 6-12 working days
Keep territories clean of any expired products,
open damages etc Fixed market return (FMR) or
actual marketing return
Route wise / van wise division of targets and
compiling data to compare actual targets and
taking CAP to monitor deviations
Deployment of adequate no of salesperson,
educated, good communication skills, punctual,
good attitude and clean appearance
 Functions of Distributor

Maintain sales data and stock report

Ensure funds to maintain stock norms,
market credit requirements and meet
companys present and future expansion
needs
Progressive and willing to invest in company
future projects / expansion programs
Regular market visit to understand the
market and retailers
DEFINITION OF A CUSTOMER-UNILEVER
Unilever Pakistan Ltd.s (UPL) customers are
classified into Primary & Secondary Customers.
Primary customers are those to whom UPL sells
directly, whereas secondary customers are the ones
to whom UPL brands are sold through UPL Primary
customers (like trade).

Presently, UPLs primary customers are its:

1. Distributors, and
2. Key Accounts
DISTRIBUTOR UNILEVER

A distributor is a party, which could be sole proprietor

or partnership or a private limited Company, which is
in the business of re-distribution of brands.

A UPL distribution is a link between UPL and its

secondary customers i.e., trade.
DISTRIBUTOR UNILEVER
Main functions of UPL distributor is to:
Stock UPL brands as per UPL policy which may be
revised from time to time
Re-distribute these brands to all POPs (Point Of
Purchase) and / or POCs (Point of Consumption) in his
assigned geographical area,
Maintain product availability (width & depth) and
displays at POP level as per UPL SKU policy,
provide sales support activities such as damaged /
expired stock handling, maintaining FIFO through proper
stock rotation, passing trade promotions to trade which
are run by UPL from time to time,
Finance his distribution operations.
DISTRIBUTOR UNILEVER
Geographical Area: UPL assigns a particular
geographical area to a distributor within which the
distributor solely re-distributes UPL brands.
A distributor is expected to meet his sales targets by
re-distributing within his assigned territory as
communicated by UPL sales staff from time to time.

Resources:
Distributor will ensure sufficient financial and non-
financial resources to meet the minimum
requirements of UPL distribution. Broadly, these
resources are:
DISTRIBUTOR:
Ensure required investment (1 week cycle stock + 3
days safety stock + 1 week credit, as a rule of thumb)
Distributor sales force
Delivery systems such as trucks / vans
Office and warehousing space
Office staff
Investment in IT such as HHTs and Back Office
equipment as per Unilever Pakistans requirement.
 Handling Agents
A third party
Supply products to sub distributors appointed in small cities
and towns & not to retail outlets
Purchase products from the Company on company invoice
price on cash and sell to sub distributors on the same price
Maintains his work force and vehicles to carry out company
business in the field
Company pays a fixed percentage commission for
rendering distribution services
Company as per a well defined freight and transportation
policy reimburses the cost of operating the vehicles
Are allotted a specified geographical territory covering
sufficient number of small towns to achieve a minimum
turnover ensuring viable operation
 Sub Distributors

A third party
Appointed for distributing the products within a
small town & sometimes nearby surrounding areas
Purchase the products from handling agents on
company price on cash basis and sell to the retail /
wholesale outlets
May have combined operations for two or more
companies but does not distribute competitors
brands
Handling agents appoint / terminate the sub-
distributors with consultation of the company
STRATIFICATION OF TOWNS
STRATA DEFINITION / POPULATION
1 Metro Towns (Karachi & Lahore)
2 >500,000
3 100,000 499,999
4 50,000 99,999
5 25,000 49,999
6 5,000 24,999
RURAL <5,000
CLASSIFICATION OF POPS
General Trade:
Retail
By definition, retailers are those POPs whose major part
of sales goes to consumers.
However, there would be conjunction retailers who
besides retailing act as wholesalers as well. In such a
case, if 50% or more of their sales comprise of retail
sales, then they will be classified as retailers.
CLASS TOTAL DAILY SALES (Rs) Example
A >8,000
B 3,000 to 8,000
C <3,000
CLASSIFICATION OF POPS
Wholesale:
By definition, these are the POPs that sell to other POPs
for the purpose of re-selling.

Like conjunction retailers, there would be conjunction

wholesalers who besides wholesaling would sell some
part of their stock to consumers as well. In such case,
similar rule shall apply i.e., if 50% or more of their sales
comprise of sales to re-sellers, they will by classified as
wholesalers.
 Retailer System Flow

Key Account
Classification

Local Super Cash & Carry Hypermarkets National

Markets Co-op
Chains
Alfateh, Aghas MAKRO / METRO Hyperstar (USC,CSD)
etc

Long term PARTNERSHIP Nestle: Trusted business advisor

Blue Account Contribution
Wholesale
29%
Channel contribution 2009

Key Acc
10%
Retail
40%

Blue Acc
21%
PJP

Distributors and the TSOs are responsible to work out the

PJPs of all the DSRs. These PJPs should contain the
following:

Section number & name

Number of outlets in the section (Ideally 40-45 POPs a
day should be the basis of setting PJPs)
Categorization of outlets
Visit frequency of every outlet included in the section
 PART E
Building Distribution Infra Structure
 Building Distribution Infra-Structure
Number of retail outlets in one day 40
Frequency weekly
Total no of outlets in a week 240
To cover 100K outlets no of vans 416
Operational cost per van 20,000
Total cost of serve 100K outlets Rs.8.3M

Turnover Calculation Example

Cost of Running Van/Other expenses Rs.20,000 p.m
Distributors Margin 5%
Break-Even (Turnover) Rs.400K
Distributors Profit 5%
Turnover with 5% Profit Coverage Rs.800K
 Trade Margin

Profit margin of the total trade chain involving distributors,

wholesalers, retailer is termed as trade margin
Stated trade margin vs. Actual trade margin, must be
monitored by the company otherwise there will be issue of
profit to trade becoming a reason for conflict
Depends upon speed of turnover and companys brand
franchise
Gathering of market information
Monitor Distributors ROI to ensure profit to trade
High margin to wholesales are not recommended as they
start under-cutting
 Total ROI to Distributors
Example of a A Class Customer:
Rs.30M
Average T/O per year

Investments Credit to the Market Rs.2.0M

Stocks Rs.1.0M Rs.3.0M

Total Investment
= Rs.30M * 3.5% Rs.1.05M
Yearly Profit

= 1.05M
ROI 35%
3.0M

Ensure Optimum Return to Customers

 Modes of Transportation

Master Truck
Trailer

3 - Wheeler
Shehzore

Bedford Truck
Donkey Cart

2 - Wheeler
Suzuki
 Sharing of Operational Cost

1. No Compensation
2. 100% Compensation
3. Percent of Sales
4. Percent of Sales plus fixed amount
REDISTRIBUTION COST SHARING
UPL shares 50% in the cost of DSRs and delivery
vehicle operations which includes rental or
depreciation of van, its running and maintenance cost
and driver salary.
REDISTRIBUTION COST SHARING
It is important to note the following:
Reimbursement of 50% will by made on the actual
current salaries & expenses
UPL will share the following:
50% of the actual salaries (exclusive of commission) of
Order Bookers, Spot-sellers, Deliverymen.
50% of the actual salary plus transport cost of supervisor
50% of the actual vans (or delivery units like motorbikes)
running cost.
50% of driver + loader salary
Managers salary not to be shared
 Reasons for Price Under-Cutting

1. Mismatch of Demand & Supply

2. Conversion of long term credit into Cash & Investing the
fund in some more profitable items
3. Sales Promotion Scheme Large Wholesalers buying in
Bulk at lower price then distributing the market at later
stage
 Reasons for Price Under-Cutting

4. Year-end incentive selling at lower price in anticipation

of target incentives

5. Selling the main product at cost or below cost to be

competitive in the market & earning through accessories

6. Selling at cost or below cost in the trade & earning by

selling in institutions
 Role & Responsibilities of a Salesman
Complete knowledge, command and control of his
allocated route and must ensure continuous
service and development of relationship, trust and
credibility within the trade
FIFO Control for all stock keeping units in the shop
Merchandising
Proper product positioning on shelves, attempting
to acquire shelf space as much as possible
Reminding retailer about hygiene being the key to
attractive displays and increased sales
Additional care about extra back up stocks to avoid
stock outs
Ensure constant promotion of products
Identify products with 4-6 months expiry shift
 Role & Responsibilities of a Salesman

Ensuring delivery of products to the outlet

Business development is a prime responsibilities of
Company sales staff
Company sales staff must always be on the look out of the
opening of new accounts, increase area coverage, carry
out display drives
Focusing on coverage and shelf share in an organized
manner and monitoring thereof by implementation of data
base management can increase Company market share as
well distribution thrust
 Changing the Role of Sales Officer
Itinerary as per distributors route plan to
cover all retail outlets in-two months cycle.
Visit of Retail outlets to monitor the following:
-- Regular visit / servicing of Distribution van
-- P.O.S. Material display
-- Complaint handling
-- Opportunity sales
-- Implementation of trade scheme
-- Relationship building
 Sales Territory

Accountability Unit
Focused Approach
Professional & Personal ambition for Sales
Manager
Test of Managerial Skills of a Salesman
Depends upon Nature of Product & Sales
Objectives (coverage & shelf share)
Ultimate Unit should be number of Retail Outlets
 Sales Organization
Director Sales

National Sales
Manager
Zonal Sales
Manager
Regional
Manager
Area
Manager
Territory
In charge

Distributors
Order
Takers Distribution
Sales Force
Retail
Outlets
 Retail Monitoring
Zone Dist.
Data

Improvement Plan
Primary Cities Distributor Retail Redesign Route Weekly sales
Data GAP
Data Mapping -Additions of vans tracking
-Frequency redesign

Analysis of
Outlet Sales
Attached Surprise Scanning of data
Town Data Distribution coverage
by Sales Team during monthly
meeting Visit plan by
Sales Officer
Distributors

Sales Organization
New Philosophy Action /
improvement
 KEY ADVANTAGES

Bottom-up Market feedback

Relationship with Retailers
Vigorous Monitoring of shelf space
Immediate filling of Market gaps by the
company
 SECONDARY SALES MONITORING

PRODUCT A SALES PRODUCT B

Dealer / Open Purcha Tot RET BALAN Open Purch RET

Distributors Bal. ses al W/S AIL CE Bal. ases Total W/S AIL BALANCE

KARACHI

HYDERABAD

SUKKUR

LAHORE

MULTAN

SAHIWAL

FAISALABAD

GUJRANWALA

RAWALPINDI

PESHAWAR

TOTAL
 Sales & Marketing Integration

Total Trade Spend comprises of all price reductions,

allowances and expenses in cash or kind granted, under
Sales Management and Trade Marketing responsibility to
shopkeepers and third parties for their efforts to sell
product to the consumers (e.g. receive, store, display, sell,
cash, refund). The various types of trade spend used are

Non Performance Trade Expenses

Wholesale Discount
Discount given to the wholesalers against the purchase of
products in bulk. This is an ongoing relationship expense in
the form of price off e.g. 1% off the purchase value.
Key Accounts Discount
Discount to key accounts (Shell stores etc) Key
accounts normally buy products in big quantities
regularly and therefore expect some discount.
The discount is in the form of price off or
percentage off.
Product Sampling
Expenses against free sampling to the consumers
during the launch of new product / item or
otherwise. The free sampling made by giving the
product free aimed at product trial
Trade Development
Van Subsidy, Distributor Sales Force Sharing,
Small Market Development Van Subsidy, any
other subsidy given to Distributor / Sub distributor
/ Handling agent for the purpose of trade
development for a certain period of time or for
achieving a certain minimum turnover objective to
make the operations viable
 Other kinds of non-performance trade
expenses are:
Shop signs + Expenses
Trade compensation for damaged packs
Eid Gifts, Calendars, etc
Performance Trade Expenses:
Product Quantity Discount
Discount given to sub distributors on the
purchase of products in big quantity. This
discount is more of target related e.g. 3
packs free on purchase of 5 cartons or 1%
off on purchase of 5 cartons.
Coupon Scheme for Consumers
Scheme via trade whereby the consumers
are offered coupons against the purchase of
products (number of products at one time or
of certain value). The redemption can be
Price Off, free products or items e.g. jars,
mugs, etc
Shelf Space Fee
Allowances given to the trade for providing
space within the store for the purpose of
sales of Company products on regular basis
as well as special during promotions
Distributors Sales Staff Incentives
Incentives given to distributors sales staff with a view to
achieve specific volume / turnover objectives for a product
or range of products. The incentive may be in cash or kind
Distributors Incentives
Incentives given to distributors / sub-distributors to achieve
specific volume/turnover objectives. The incentive is given
on monthly, quarterly or any other period. The incentive
may be in cash or kind
Liquidation of Short Shelf-Life Products
Expenses/Discount offered to retailers for liquidating
products with remaining short shelf life. (Activities to move
products being close to Best Before or Use by dates,
product still on the shelf)
Exclusivity Discounts
Discounts given to some retailers for being
exclusive with a product or range of
products in the store. The discount is in the
form of Price-Off
Trade Offer Product Launches
Discount given to retailers during the launch
of new product/item. The discount is for a
certain period/quantity fixed by brand/sales
Joint Promotion
Company product coupled with another
company product aimed for trade or
company
Trade Letter
Letter printed for specific consumer and
trade promotion
Product Launches in the
Channel
 Metro Category Project :
selected as best practice for emerging markets

Culinary before Culinary-After

Beverages before- Beverages After

 Hyperstar Best practice : Category management
connecting shopper with the category

Powder Milk Rtd Juices Milk Modifiers Chilled Yogurts

Category POP and segmentation

Category
visual
merchandisin
g
Category POP and segmentation
EVERYDAY MIX TEA LAUNCH
CERELAC LAUNCH
 Trade Channels

Level 1 Level 2

1.1 Key Accounts

1. Planned 1.2 Large
Shopping
Groceries

2.1 Small Stores

2. Ad Hoc 2.2 Petromarts
Convenience 2.3 Tobacco
Kiosks

3. Specialty Food 3.1 Bakery

& Drink Shopping 3.2 Pharmacy

4. Non Outlet
Business Partners 4.1 Wholesale
 Parameters For Monitoring Distributors
No of Outlets per distributors
No of A Category outlets
Optimum distance for van coverage per day
Ideal location of distributors warehouse
Optimum No of outlets per van per day
Ideal productivity per van
Optimum van visit frequency
Optimum monthly turnover of distributors on the
basis of per outlet purchase per visit
Optimum distributors investment
No of vans required to cover outlets
Ideal credit extension in market on the basis of
monthly turnover
 Parameters For Monitoring Distributors

Ideal stock cover with distributor on the basis of monthly

turnover
Ideal distributors monthly profit including annual incentive/
Cash Discount etc (if any)
Distributors ideal ROI
Ideal sales per outlet per visit
 DISTRIBUTION SCORE CARD
Strategic Performance Measure Target
Success Factor
Process Coverage Retail Mapping 78 towns
Retail Sales Tracking 25 key dist.
Primary & Secondary Sales All Dist/Dealers
Monitoring
Shelf Share Sales Organisation Re- 18 Zones
alignment 50
Outlets survey target to sales 50
Spot selling / order booking >15%
Focus on New product / odd 25 key towns
SKUS 25 key towns
Coverage Audit
Appointment of New
Distributors.
Penetration Distribution Data Management 78 Main Towns

Relationship Development of 2nd line 5000 key

customer base customers
 DISTRIBUTION SCORE CARD
Strategic Performance Measure Target
Success Factor
Customer ICSL % Delivery of Requested 100
Brand Index Price Premium on 120
Customer competition
Satisfaction
1st line Survey #1
2nd line Retail Panel : Monthly #1
result
Learning Distribution Main / Adj Towns-Outlets 78 Main Towns
Data data / coverage position 25 key
Retail Mapping All key customer-Self Distributors
/ Sales Data monitoring
 PART F
Channel Conflict
 Conflict
Conflict exists when a member of marketing channel
perceives another members actions to be impeding of
his goal
Object of each others frustration
Examples
Pushing the inventory during lean period
Extra discount (underhand) policy to push the sales
Price Under-cutting
1. Causes of Channel Conflict
Role Incongruities
A Role is a set of prescriptions defining what the
behavior of position members should be
 Conflict
Each member of channel is expected to fulfill certain
role
Manufacturers Demand generation, distributors
Coverage / Shelf Share
If any one of them deviates from the given role a
conflict situation may result.
2. Resource Scarcities
Disagreement over allocation of some valuable
resources to achieve goals
E.G. Allocation of retailers
Direct Selling to institutions
 Conflict
3. Perceptual Differences
Different perception of the same stimuli & attaching
different interpretations
E.G. Pop Materials
4. Expectation Difference
Expectations about the behavior of other channel
member
Predictions/forecasts concerning the future behavior of
other channel
These forecasts may turn to be inaccurate
 Conflict
5. Decision domain disagreements
Channel members explicitly or implicitly carve
out for themselves an area of decision making
that they feel is exclusively theirs
E.G. Pricing Decisions (Manufacturers Control
VS Wholesalers domain)
6. Goal Incompatibilities
Each member has his own goals
Incompatibility leads to conflict
Conflicting Goals on Coverage
 Conflict
7. Communications Difficulties
A foul-up or breakdown in communications can
quickly turn a co-operative relationship into a
conflicting one
Feedback on market development program
Channel Conflict & Efficiency
Mostly - Negative Impact
No Effect
Higher level of dependency / commitment
Positive Effect
Conflict might serve as an impetus to re-
appraise their respective policies
 Conflict
Managing Channel Conflict

1. Detect
After the fact approach Negative Effect
Early warning system
Surveys/Visit/Actions
2. M.C. Audit
A periodic/regular evaluation of key areas of
relationship
Customer focus group meetings
3. Distributors advisory councils/committees
Regular meeting to detect conflicts
Make conscious efforts to detect & solve conflict
 Conflict
Channel Conflict
1. Pushing stock during lean period
2. Extra discount (underhand) policy to push the sales
3. Price under-cutting/cross flows
4. Lack of consumer pull-demand generation activity by the
manufacturers
5. Lack of optimization of coverage/shelf share
6. Allocation of retailers
7. Allocation of towns/cities Re-organization of distribution
set-up
8. New Products Distribution
9. Direct selling to institutions
10. Effective use of P.O.S materials
 Conflict
11 Predictions / Forecasts of Sales
12 Pricing decisions (Manufacturers Control VS
Distributors/Wholesalers Domain)
13 Communication difficulties
14 Feedback on business/market development
program
15 Expectation on year-end profitability
16 Profits to the trade
17 Range availability
18 Selling of competition products to increase
profits
19 Payment on time vs delivery of stores
20 Priority of stock allocation at time of shortage