Channel Management

CHANNEL MANAGEMENT
Channel Management can be

classified into three broad phases
Use of power Bases
Identifying & Resolving Channel
Conflicts
Channel Coordination
Use of power bases
Channel system consist of a no of
players
All players are not equally
motivated to implement the ideal
channel design
Use of power bases brings
diverse channel partners in line
for implementation and
effectiveness of channel
Identifying & Resolving Channel
Conflict
Channel conflict is generated
when the actions of any channel
member come in the way of the
entire channel achieving its
objective
It usually occur because of 3
CONFLICT
reasons
GOAL DOMAIN PERCEPTIO

N
Channel Co-ordination
A channel system is set to be well
coordinated if each member
understands his role correctly and
performs it to help the entire system
to achieve its customer services
objectives.
In a coordinated channel, therefore,
◦ The interest of all the channel members are
protected
◦ The action of all channel members are in line
with the overall objectives of the channel
Use of Channel Power
All channel consist of a number
of players who are dependent on
each other and it’s the power
equation between them that keep
them working together to achieve
the channel objectives
The extent of dependence of one
part of the channel on the other
part decides the most
appropriate power base that
operates
Power
Ability
to influence the actions of
channel members
Sources of power
Reward
Coercion
POWER
Reference
Legitimat
e
Expert
Situations where exercise of
power becomes necessary
Helping the entire channel system gives
the feeling to some of the channel
partners that others may be making
more margin at their cost
Each channel member is in business to
maximize his own profits. He is less
worried about the profitability of the
entire channel system.
The focus on individual profitability
affects the thinking on cost factors like
inventory holding, extending credit etc.
Reward
Reward is a benefit given to a
channel member for him to
conform his behavior in line with
the system.
◦ Incentives on achieving sales targets
◦ Best distributor award in the annual
sales conference
The Reward power is the most popular

in the administration of marketing
channels
Coercion
Hint of punishment for the channel
member if he does not fall in line with
the requirements of a channel principal
◦ Withholding of incentives if the
infrastructure promised by industrial
distributor is not build up
◦ Pushing the distributors to purchase on
demand drafts against earlier permission to
purchase on cheques
Develops distrust between channel partners

Expertise
Expert power is based on the
special knowledge that the
channel principal may have which
is of particular benefit to the
channel partner
◦ HUL
Legitimacy
This power emanates from contracts or
agreements usually in writing
Contract clearly define the parameters of
behavior and action expected from each
of the signatories
◦ The contract may stipulate that the
distributor will cover the market with ready
stock
◦ Contract may state that for an industrial
distributor he will give a 30 day credit period
for collection of payments from all orders
above a certain Rupee value
Reference
This power stems from sheer
association
A principal may be considered as
the industry gold standard and
the channel partners associated
with the principal feel proud to be
a part of his distribution
organization.
◦ Nestle
Channel Conflict
Itis situation of discord or
disagreement between channel
members from the same
marketing channel system
Reasons for Channel
Conflict
Goal Incompatibility
Unclear Role Definition
New Channel Partner
Target Fixing Exercise
Extension of Credit
Style of Conflict
Resolution
Avoidance
Aggression
Accommodati
on
Compromis
e Collaboration
Maximum efforts &

Least effort & Best Results
Results
Contd..
Avoidance:
Used by Weak Channel Members. This can
only happen when the relationship is not of
much importance and the problem is
postponed or discussion is avoided.
Aggression
This means being concerned about one’s
own goals without any thought for others- a
purely selfish style.
Contd..
Accommodation
A situation of complete surrender. One party helps
the other achieve its goals without being worried
about its own goals. Obviously this method
strengthens the relationship. The emphasis is on
full cooperation and could result in the other party
also becoming flexible in its approach. It can also
lead to exploitation of the party willing to be
accommodative.
Compromise
Both parties agree to give up some of their
requirements and find a mid way solution.
Contd..
Collaboration
This route tries to maximize the benefits for
both the parties while finding a solution to
the dispute.- A win-win approach. The
approach requires a lot of time & effort to
succeed. Both sides should be prepared to
share sensitive information for this approach
to work.

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Channel Management can be

GOAL DOMAIN PERCEPTIO

The Reward power is the most popular

Develops distrust between channel partners

Maximum efforts &

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