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Channel Power and Channel

Conflict

By: B D Nathani
Challenges in exercising power and
achieving control in marketing channels
• Loose alignment between channel
members
• Central direction is lacking
• Single ownership is often missing:
intensity
• Formal authority is absent
• Reward and penalty system is not
precise
• Central planning is rare.
2
Roles in Marketing Channels

A set of prescriptions defining what the behavior


of a position member should be

• Roles change over time.


• Straying far from a role may cause conflict.
• Roles help describe & compare the expected
behavior of channel members and provides insight
into the constraints under which they operate.
• Role Stress: Role Ambiguity and Role Conflict
Roles in Marketing Channels

Questions to help the channel manager

• What role does the channel manager expect a particular


channel member to play in the channel?
• What role is this member expected to play by his or her
peers?
• Do the manager’s expectations for this member conflict
with those of the member’s peers?
• What role does this member expect the manager to
play?
4
Power in the Marketing Channel

The ability of a particular channel


member to control or influence the
behavior of another channel member

Keys to understanding Power:


• Power Bases
• Use of Power Bases
cf) Control
Bases of Power for Channel Control*

Reward Power

Coercive Power

Legitimate Power

Referent Power

Expert Power
Using Power in the Marketing Channel

1. Identify available power bases


Bases are a function of size of:
• producer or manufacturer
• organization of channel
• particular set of circumstances

2. Select and use appropriate


power bases to better or
worsen channel relationships
FIGURE 8.1: THE NATURE AND SOURCES OF
CHANNEL POWER

A’s Level of
Investment in: DEPENDENCE
Coercion OF B ON A
Reward
Legitimacy
Expertise
A’s Offering to B:
Reference
Coercion Reward
Legitimacy Expertise
Reference
Competitive
Levels of: POWER OF
Coercion A OVER B
Reward
Legitimacy
Expertise
Reference
• Countermeasures for balancing
power asymmetry*
• Develop alternative sources
• Organize a coalition with other firms
• Walk out of the relationship!
• Raise the other party’s dependence
on you

©McGraw-Hill Companies, Inc. 2002 9


Interfirm Communication

- Four Dimensions of Communication


1) Content*
2) Frequency
3) Modality
4) Directionality
- Influence Strategies**
Behavioral Process in Marketing Channels IV:
Using Power to Exert Influence

• Influence Strategy • Power Bases


– Promise – Reward
– Threat – Coercion
– Legalistic – Legitimacy
– Request – Referent, Reward
– Information – Expertise, Reward
exchange
– Recommendation – Expertise, Reward

©McGraw-Hill Companies, Inc. 2002 11


Communication Processes

Behavioral Problems in
Channel Communications

2.
1.
Differences in
Differences in goals
the kinds of
between
language they use
manufacturers &
to convey
their retailers
information
Communication Processes (cont’d)

Behavioral Problems in
Channel Communications

3. 5.
Perceptual 4. Inadequate
differences Secretive frequency
among behavior of
members communication
• Major Sources of Channel Conflict*
–Competing Goals
–Different Perceptions of Reality
–Clashes over Domains: Intrachannel
competition
–Multiple channels and Gray market
–Threats by Channel Partner

©McGraw-Hill Companies, Inc. 2002 14


Managing Channel Conflict

Detecting
conflict

Appraising the
effect of
conflict

Resolving
conflict
Managing
Conflict
• Conflict Resolution Strategies
1. Information-intensive mechanisms:
DAC, Personnel exchange
2. Third-party mechanisms: mediation
and arbitration
3. Building Relational norms: flexibility,
solidarity

©McGraw-Hill Companies, Inc. 2002 16


CONFLICT RESOLUTION STYLES
High Cooperativeness
Accommodation
Cooperativeness: Collaboration
concern for the
other party’s or
outcomes Problem solving

Compromise

Low Assertiveness High Assertiveness

Avoidance
Competition Assertiveness:
Concern for one’s
or
own outcomes
Aggression

Low Cooperativeness
Based on Thomas (1976)
• Key Qualitative Outcomes
– Trust

– Satisfaction

– Commitment

©McGraw-Hill Companies, Inc. 2002 18


FIGURE 9.1: HOW HIGH LEVELS OF CONFLICT ERODE
CHANNEL RELATIONSHIPS

CONFLICT _
Level of tension, frustration, ECONOMIC SATISFACTION
disagreement in relationship of focal firm: positive affective
experienced by focal firm response to financialrewards
derived from relationship or
_ economic gratification
_

TRUST
Focal Firm’s belief in
counterpart’s honesty and _ NON-ECONOMIC
benevolence SATISFACTION
+
of focal firm: positive affective
response to psycho-social aspects of
COMMITMENT relationship, or gratification from
Focal Firm’s desire to continue non-financial sector
relationship and to sacrifice
to build and maintain it

Based on Geyskens, Steenkamp, and Kumar (1999)