Channel Behaviour, Channel Conflict and Its Resolution

Channel Behaviour and Channel Conflicts

Distribution channels are more than just a grouping of the company's products that are connected by different flows. In order to achieve corporate, individual, and channel goals, people and businesses interact with one another through these rather sophisticated behavioral systems. In certain channel networks, interactions between loosely organized enterprises only occur informally. Others are composed of official exchanges that are controlled by powerful organizational organizations.

A marketing channel consists of businesses that have joined forces to achieve a shared objective. Each and every channel participant is reliant on the others. For instance, a Ford dealer relies on Ford to create vehicles that satisfy customer demands. Ford relies on the dealer to draw customers, convince them to buy Ford vehicles, and maintain those vehicles after the sale. The other dealers are likewise counted on to deliver quality sales and service that will boost the brand's reputation. The degree to which the entire Ford marketing channel successfully competes with the channels of other auto manufacturers determines the success of specific Ford dealers.

Every channel participant contributes significantly to the channel. For instance, Samsung's primary responsibility is to design consumer-friendly electronics items and generate demand through national advertising. The best Buy's job is to answer customers' questions, complete deals, and display these Samsung products in convenient locations. The channel works best when each participant assumes the activities that suit them best. Since the success of any individual channel member depends on the performance of the entire channel, all channel companies should collaborate effectively. To achieve the overall channel goals, they must cooperate, plan their operations, and comprehend and embrace their roles and duties.

Rarely do individual channel members adopt such a broad perspective. Sometimes collaborating to achieve broader channel goals requires sacrificing specific company objectives. Members of a channel are interdependent, although they frequently behave independently for their own short-term interests. On who should do what and for what rewards, they frequently differ. Channel conflict results from such differences about objectives, responsibilities, and rewards.

Horizontal conflict: It appears inside the same company's channel level. For instance, some Ford dealers in Chicago may claim that other dealers in the city steal their customers by running advertisements outside of their designated areas or charging too little for their products. Or Holiday Inn franchisees could gripe that other Holiday Inn operators are overcharging visitors or offering subpar service, which is bad for the brand's reputation.

Vertical conflict: Conflicts between several levels of the same channel are mentioned. For instance, Burger King and its franchised dealers have frequently clashed in recent years over issues ranging from cheeseburger prices to increasing advertising budget and inflammatory marketing.

There will be some healthy rivalry in the channel, which will cause some tension. The channel will benefit from this rivalry since without it, it risks becoming uninspiring and passive. For instance, the dispute between Burger King and its franchisees may be seen as a typical exchange of rights between the channel partners. Serious disputes, however, can undermine channel connections and interfere with their efficiency. In order to prevent the channel conflict from getting out of control, Burger King needs to properly regulate it.

The Vertical Marketing System (VMS), Horizontal Marketing System, and Multichannel Distribution System can all be used to resolve channel conflict.

Vertical Marketing Systems

Every channel member's function must be defined, and channel conflict must be handled, for the channel to operate well as a whole. The channel will operate more effectively if it is built to include a company, organization, or mechanism that offers leadership and has the authority to delegate tasks and resolve conflicts. Such strength and leadership were lacking in traditional distribution channels, which frequently led to destructive disagreement and subpar results. The rise of vertical marketing systems that offer channel leadership has been one of the largest channel developments in recent years. One or more independent manufacturers, wholesalers, and retailers make up a traditional distribution chain. Every one of them operates as a distinct company that seeks to maximize its earnings, possibly even at the expense of the system as a whole. No, there is no official system in place to assign duties or settle disputes among channel members. Instead, any member of the channel has influence over the other members.

In contrast, manufacturers, wholesalers, and retailers make up a vertical marketing system (VMS), which functions as a single system. The other channel members must work together because one owns them, has agreements with them, or has enough power over them. The producer, wholesaler, or retailer may hold a disproportionate amount of power in the vertical marketing system (VMS). We shall examine the corporate, contractual, and administered categories of VMS. Every form of VMS has a unique method for establishing authority and dominance in the channel.

• Corporate VMS: Under a single ownership, a corporate VMS unifies the various stages of manufacturing and delivery. Through the normal business channels, coordination and conflict management are accomplished. Unknown Italian eyeglasses manufacturer Luxottica creates a number of well-known eyewear brands, including its own Ray-Ban and Oakley lines as well as licensed lines for Burberry, Chanel, Dolce & Gabbana, Polo Ralph Lauren, Donna Karan, Versace, Prada, and Bulgari. Then, it sells these brands through some of the biggest optical retailers in the world, including Sunglass Hut, Pearle Vision, and LensCrafters, which it also owns.

• Contractual VMS: A contractual VMS is made up of independent businesses at various stages of production and distribution that come together through contracts to generate greater economies of scale or sales impact than they could alone. Through contractual agreements, channel members coordinate their actions and handle conflict. The most typical form of contractual agreement is with a franchising company.

• Administered VMS: In a managed vertical marketing system, leadership is established by the size and strength of one or a small number of dominant channel members rather than through shared ownership or contractual relationships. Resellers might provide manufacturers of the leading brand with strong commercial collaboration and support. Large retailers, for instance, Walmart, Barnes & Noble, and Home Depot, can have a significant impact on the numerous suppliers of the goods they sell.

Horizontal Marketing Systems

Another marketing strategy is the horizontal marketing system, in which two or more businesses at the same level band together to take advantage of a fresh marketing opportunity. Working together, businesses might use their combined financial, production, and marketing capabilities to achieve more than any one business could on its own. Companies may work together with rivals or non-rivals. They can also establish a separate firm or work together on a temporary or permanent basis. McDonald's, as an illustration, places "express" variations of their eateries in Walmart stores. McDonald's profits from Walmart's high levels of customer traffic, and Walmart prevents hungry customers from visiting McDonald's.

Multichannel Distribution Systems

In the past, many businesses sold to just one market or market segment through a single channel. Nowadays, more and more businesses are using multichannel distribution systems due to the expansion of consumer groups and channel options. When a single company sets up two or more marketing channels to target one or more consumer categories, multichannel marketing takes place. Multichannel systems are being used much more frequently these days.

Reference:

Kotler, P., & Armstrong, G. (2013).Principles of Marketing.Chennai: Pearson India Education Services Pvt Ltd

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