Chapter 6 Managing Marketing Channels and Channel Conflicts

Transcription

1 Chapter 6 Managing Marketing Channels and Channel Conflicts

2 Chapter Plan Managing Marketing Channels Integrated Marketing Channel Concept of Conflict Definition of Conflict Channel Co-operation Types of Conflict Resolving Channel Conflicts

3 Managing Marketing Channels 1. Setting Channel Objectives 2. Deciding Channel Pattern 3. Selecting Channels 4. Training and motivating channels 5. Assessing channel performance and modifying channel arrangements

4 Integrated Marketing Channel Increasing trends towards using the integrated marketing channels Vertical Marketing System Horizontal Marketing System All intermediaries can join to build an Integrated Channel System and the can become strategic partners.

5 Conventional Marketing System Most common and widely used arrangement All the members play similar roles Every member focuses only on his own goals and profits. CMS is unstable Members are not having a common goal

6 Horizontal Marketing System (HMS) Integration of multiple intermediaries at the same level under one management structure. Merchandising Conglomerate is the best example of HMS E.g.. McDonald s, Pizza Ht Retailers like Wal-Mart have collaborated effectively with their suppliers, channel partners, customers, etc.

7 VMS All participants work together in the integrated manner Through this arrangement, wide maximum distribution is possible at economy. This system is suitable and widely used for consumer durables, pharmaceutical products, FMCG or where expensive distribution is required.

8 Types Of VMS a. Corporate VMS b. Administered VMS c. Contractual VMS a. Wholesales sponsored voluntary chain b. Retailer sponsored voluntary chain c. franchise

9 Multi-channel Marketing System Manufacturer uses two or more different types of channels to sell the same products to the different or even the same buyers. Manufacturers follow different distribution policies for the different segments Combination of HMS & VMS can be used E.g. Bata, Bombay Dying, Bajaj Auto

10 Channel Conflict A situation in which one channel member perceives another channel member-(s) to be engaged in behaviour that prevent it from achieving its goals. Conflict is opposition, disagreement, or discord among the organizations. Constructive conflict is a healthy phenomenon

11 Channel Co-operation Channel cooperation occurs when the channel members work together for their mutual benefits Channel members must work to improve cooperation and reduce conflict to have long-term satisfying relationships. The must work hard to turn conflict into cooperation

12 Types of Conflict 1. Latent Conflict 2. Perceived Conflict 3. Felt Conflict 4. Manifest Conflict 5. Functional conflict

13 Classification of Conflicts 1. Horizontal Conflict 2. Vertical Conflict 3. Inter type Conflict 4. Multi-channel Conflict

14 Reasons behind Vertical Conflicts i.e. manufacturer-dealer, manufacturerretailer, wholesaler-retailer, franchiserfranchisees Occurs due to the different in goals and objectives Lack of role clarity Over dependence on the manufacturers

15 Conflicts due to the Manufacture s Actions Dual Distribution Over Saturation Partial treatment New Channels No or inadequate sales support Irregular communication Stipulation of ordering in advance

16 Conflicts due to the Manufacture s Actions Delay in delivery the products Dispatching products without confirm order Refusal to replace or take back the goods damaged in transit No cooperative advertisements No or inadequate credit offer to the intermediaries

17 Conflicts due to the intermediaries action Promotion and sell of private labels Carry competing lines No support in the manufacture s promotional efforts Fail to collect payment from the market Price cut Refuse to service Lack of timely market feedback

18 Reasons Horizontal Conflicts Price-off by one dealer Aggressive advertising and pricing by one dealer Crossing the assigned territory and selling in other dealer s area Unethical practices or malpractices of one dealer or retailer

19 Inter Type Conflict Occurs when, the intermediaries dealing in a particular product starts trading outside their normal product range. E.g. Super market selling vegetables compete with small retailers Pan-bidi shops sells mobile prepaid cards This concept is called scrambled Merchandising where their retailers keep the merchandise lines that are outside their normal product range

20 Multi-Channel Conflict Occurs when the manufacturer uses a dual distribution strategy. Manufacturers can bypass the wholesalers and sell directly to the large retailers This is common in ready-made garments. Often the retailer compete with company s own outlets

21 Resolving Channel Conflicts 1. Channel Leadership 2. Adoption of super ordinate goals 3. Exchange of persons between tow or more channel levels 4. Co-operation

22 Resolving Channel Conflicts 5. Joint membership in and between trade associations 6. Diplomacy 7. Third-party Mechanisms 1. Arbitration 2. Mediation

23 Summary Increasing trends towards using the integrated marketing channels Vertical Marketing System Horizontal Marketing System A situation in which one channel member perceives another channel member-(s) to be engaged in behaviour that prevent it from achieving its goals.

24 Summary Channel conflicts can be classified as Horizontal Conflict, Vertical Conflict,Inter type Conflict, Multi-channel Conflict. Channel cooperation occurs when the channel members work together for their mutual benefits There are several ways to resolve channels problems i.e. channel leadership, Co-optetion, Diplomacy, Arbitration etc.