Marketing Channels FAQs

Question:What is channel conflict?

Imagine any two parties and their relationship. Take a manufacturer and a distributor, for example. According to research in channels of distribution, we know that the key idea for understanding their relationship is each party’s perceived "dependence". In particular, we want to know how each party perceives their own dependence in the relationship and also how they perceive the other party’s dependence in the relationship. If the two parties perceive they are mutually dependent, a healthy relationship can persist. If the two parties perceive they are mutually independent, a healthy relationship can also exist (although it won’t be a close relationship). Problems arise when one entity perceives they are more dependent on the other than vice versa. Asymmetric Dependence Leads to Channel Conflict Notice I have used the word entity, not brick and mortar manufacturers or distributors. In fact, the research that supports this is found in marriage counseling, organizational theory, and marketing. So it can be applied quite widely (yes, good marriages are typically mutually dependent).

Question:Why are online firms encountering channel conflict? How can they avoid it?

The fact is that distributors who deal with manufacturers who go online perceive that these manufacturers are not as dependent on them as they are on the manufacturers. This is called "asymmetric dependence", and not surprisingly, this leads to channel conflict in any world (online or off). Firms that avoid this asymmetric dendences successfully include firms that don’t use distributors, like Dell Computer. There is no dependence (since there is no distributor), so conflict is not relevant. Of course, these ideas apply to Dell and its suppliers, and in those relationships dependence and the possibility for conflict is relevant. So, what can we expect to happen in these situations with channel conflict in an online world - and therefore how conflict can be avoided? Well, the same thing we would expect in an off-line world. For one thing, firms will generally do things to avoid conflict. One way is for the manufacturer to sell certain products online, and others through off-line stores. Black and Decker, for example, might sell certain models online and others through Home Depot. To the extent that the products are not the same, and thus the distributor perceives that competition with the manufacturer does not exist, channel conflict will be lower because the perceptions of asymmetric dependence will be lower. But other firms will try other ways to lower conflict, and these will take the form of "countervailing dependence" actions. In friendly language, a countervailing dependence action is something that someone will do to lower its perceived dependence. Thus, if a distributor perceives that it is more dependent on a manufacturer than vice versa, it may take a countervailing dependence action by looking for other manufacturers to represent. In the case of online selling, a distributor could also lower its dependence on a manufacturer by selling online as well. Channel conflict and any action a distributor takes in this situation to lower its dependence is predictable - and it doesn’t make any difference whether its digital or analog, online or off.

Question:How do you motivate partners to act the way you want them to?

Well, this is certainly a broad question and one that could take hours to explain. But there's a short answer you might find useful, and it is based on the work of some social psychologists some 40 years ago (their names are French and Raven). They tried to determine what would make someone have power over another, and thereby get them to do things. It turns out there are 5 sources of power, and you might think about which ones of these you could leverge. Here they are: Reward Power - just like it sounds. Find something to reward your partner with, like extra commissions, etc. You probably knew this already. Coercive Power - punish them for not doing what you want. Again, you probably know this, but appreciate that most recipients don't like punishment and it doesn't lead to much power. Legimitate Power - this mean having contractual rights over your partners. Again, if you're not using this already, see if there are any means to gain legimitacy. Referent Power - it turns out that if your partner believes that you're someone they want to hang around with, this gives you power. Ok, having a great brand name is one way to get referent power, but you might think of other ways. Expert Power - if your partner thinks you're an expert, then you can gain power. This may mean understanding your partner's business better than they do. In any case, gaining expertise is important in any situation, but it serves to help you get your channel partner to do the right thing. You can read more about other ways to "incent" your partners and problems that channels of distribution create in this tutorial.

Question:Is there a systematic sales process for selling products?

There are many systematic sales processes out there that you can turn to, however let us suggest a good starting point. This is best thought of as a 5 step process. First, you must establish rapport and credibility to the person (i.e., the client) you're trying to sell to. After you've established this rapport and credibility, then start to gather information about what needs the client is trying to satisfy. This takes some patience and the more difficult ability to listen carefully. Next try posing some action to solve the client's problem. Finally, try to get some sort of commitment from the client. Even a small commitment is important to achieve. You can build on that larger commitment later. Note all of this does not have to be done at one time. Don't rush it. Good selling takes time, and some clients don't want to be rushed. In any event, you can start this whole process off by doing some pre-call planning, that is figure out what you want to accomplish before you meet the client. Again, you can make this more complicated by adding steps in between, but the basic process is essentially the same.

Question:What are some effective ways companies can market their services together?

It seems like the central issue in your question is the alliances. These are essentially inter-company relationships, so the key ideas to think about are how to build relationships and market services together. This is a broad topic, to be sure, and one that people tend to make more complicated than it needs to be, since relationships between companies are a lot like relationships between people. You need a certain degree of complementarity to market services together...so look for partners that don't overlap with yours, since there is no incentive to cooperate. The same gos with effective seminars, etc....complemtarity is the key issue. Beyond that it resides mostly in the ways you build trust and mutual dependence since these are the things that will preserve the relationship (and thus the effectiveness)...so how to you build trust? First, make sure your share rewards and burdens, make promises that you can deliver on and establish norms of behavior between you and the partners. Create a sense of mutual dependence and use credible commitmenets. You can read more about these ideas in our article... on CRM and another one mentioned therein. Obviously there are many little tactics you can use to make seminars, etc. more effective, but they all are based on the same general ideas outlined above. You might try reading articles at Clickz for these little tactics (go to their affiliates section)...there are many articles that deal with affliates, which are basically just inter-firm alliances.

Source: marketingprofs.com

 

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