The document discusses channel management and conflict resolution. It states that channel management occurs in three broad phases: using power bases, identifying and resolving conflicts, and coordinating the channel. Channel conflicts can arise from differences in goals, responsibilities, or market perceptions between members. There are various styles of resolving conflicts, from avoidance to collaboration, with the latter providing the best results. The document also notes key characteristics of managing channels for the services sector.

1. Chapter
13
Channel Management
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2. Learning Objectives
• Understand how and why channel conflicts
occur
• Look at ways of managing conflict
• Channel practices followed to resolve
conflicts
• Principles of channel management
• Various parameters on channel policy
• Way in which services use marketing
channels
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3. Channel Management
• Is in three broad phases:
– Use of power bases
– Identifying and resolving channel conflicts
– Channel co-ordination
Use of power….
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4. Use of Power Bases
• Channel system has a set of players:
– Not equally motivated to implement the ideal
channel design
– Whose expectations from the system differ
• Use of the 5 power bases brings diverse
channel partners in line for effective
implementation
– 5 power bases are: reward, coercion, legitimate,
expert and referent (French & Raven)
– Two more power bases in the Indian context are
support and competition
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5. Use of Channel Power
• Channel members are dependent on each
other. The power equations between them
keep them working together.
• There are basically 5 types of power bases –
reward, coercion, expert, reference and
legitimacy. 2 more can be considered as
support and competition.
• Extent of dependence defines the power base
which is appropriate.
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6. French & Raven
“Power” of Motivation
• Reward – incentives for good performance
• Coercion – threat of punishment for non-
performance
• Referent – benefit of sheer association with a
strong company
• Legitimate – arising out of a contract
• Expert – specialized knowledge
• Support – additional benefits for better
performers only
• Competition – created between channel
partners Countervailing power……
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7. Countervailing Power
• Balances the power exerted by one channel
member. It is not a one-sided equation.
• Both the channel member and the principal
can have influence on each other.
• Results from interdependence within the
channel system.
– Company exerts power on the distributor to get its
coverage and revenues
Examples
– Distributor has enough influence on his customers
and this is critical for the company also
– Weaker partners do get exploited – ancillary units
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7

8. Channel Co-ordination
• Channel system is well co-ordinated if each
member understands his role correctly and
performs it to help the system achieve its
customer service objectives.
• In a co-ordinated channel:
– Interests of all channel members are protected
– Actions of all are in line with overall objectives
– Flows are streamlined to desired customer service
objectives
• Channel co-ordination is an on-going effort
Conflict….
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9. Channel Conflicts
• Conflict is generated when actions of any
channel member come in the way of the
system achieving its objectives
• Three broad categories of channel conflict
are:
– Goal conflict – understanding of objectives by
various channel members is different
– Domain conflict – understand responsibilities and
authority differently
– Perception conflict – reading of the market place is
different and proposed actions vary
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10. Channel Conflict
CONFLICT
GOAL DOMAIN PERCEPTION
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11. Channel Conflict
• Situation of discord or disagreement between
partners in the same channel system – has
negative connotations and is driven more by
feelings than facts
• Conflict is part of any social system – getting
disparate entities to work together as in a
channel system is also one such social unit
• If any member feels that another is working in
a manner as to affect him, conflict results
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12. Conflicts Result From…
• Each channel member wanting to pursue his
own goals
• Each wants to retain his independence
• There are limited resources which all of them
want to utilise in achieving their goals
• Features of conflicts:
– Initially latent and does not affect the working
– Is not normally possible to detect till it becomes
disruptive
Four stages….
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13. Four Stages
LATENT
PERCEIVED
FELT
MANIFEST
Each stage is progressively more severe than the earlier one
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14. Types of Conflicts
• Latent Conflict:
– Some amount of discord exists but does not affect
the working or delivery of customer service
objectives.
– Disagreement could be on roles, expectations,
perceptions, communication.
• Perceived Conflict:
– Discords become noticeable – channel partners
are aware of the opposition.
– Channel members take the situation in their stride
and go about their normal business
– No cause for worry but the opposition has to be
recognized
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15. Types of Conflicts
• Felt Conflict:
– Reaching the stage of worry, concern and alarm.
Also known as ‘affective’ conflict.
– Parties are trying to outsmart each other.
– Causes could be economical or personal
– Needs to be managed effectively and not allowed
to escalate.
• Manifest Conflict:
– Reflects open antagonistic behaviour of channel
partners. Confrontation results.
– Initiatives taken are openly opposed affecting the
performance of the channel system.
– May require outside intervention to resolve
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16. Reasons for Channel Conflict
• Roles not defined properly
• Allocation of scarce resources between
members seem unfair to some
• Differences in perception of the
business environment
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17. Reasons for Channel Conflict
• Future expectations not likely to materialize
• Decision domain disagreements – who has to
decide on what (key account pricing)
• Channel members do not agree on objectives
• Misunderstanding or mis-interpretation of
routine business communication
Resolving….
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18. Resolving Conflicts
A 4 Stage Process
Understanding nature and intensity
Tracing the source of the conflict
Understand the impact of the conflict
Strategy and plan of action for resolution
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19. Conflict Resolution Styles
Avoidance Styles are a combination
of assertiveness and
Aggression co-operation.
Accommodation
Compromise
Collaboration
Least effort and Maximum effort and
results Best results
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Kenneth W Thomas

20. Avoidance
• Used by weak channel members.
• Problem is postponed or discussion
avoided.
• Relationships are not of much
importance.
• As there is no serious effort on getting
anything done, conflict is avoided.
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21. Aggression
• Also known as a competitive or selfish style.
• It means being concerned about one’s own
goals without any thought for the others.
• The dominating channel partner (may be the
principal) dictates terms to the others. Long
term could be detrimental to the system.
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22. Accommodation
• A situation of complete surrender.
• One party helps the other achieve its goals
without being worried about its own goals.
• Emphasis is on full co-operation and flexibility
in approach. May generate matching feelings
in the receiver.
• If not handled properly, can result in
exploitation
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23. Compromise
• Obviously both sides have to give up
something to meet mid way.
• Can only work with small and not so
serious conflicts.
• Used often in the earlier two stages.
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24. Collaboration
• Also known as a problem solving approach
• Tries to maximize the benefit to both parties
while solving the dispute.
• Most ideal style of conflict resolution – a win-
win approach
• Requires a lot of time and effort to succeed.
• Sensitive information may have to be shared
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25. Channel Policies
• Defines how the channel is required to
operate.
• Normally framed by the channel principal to
guide the operations of the channel system
• If not framed properly could prove the starting
point of channel conflicts.
• Some subjects of channel policies could be
as seen in the next slide:
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26. Channel Policies
• Markets to be covered
• Customer coverage
• Pricing
• Product portfolio to be handled
• Selection, termination of channel
members
• Ownership of the channel
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27. The Services Sector
• Twice the size of the manufacturing sector
• Services offered are to be in line with
customer demand
• Services have to be presented in an
appealing manner to sustain customers.
• Needs specialized channels which
understand the characteristics of service
delivery
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28. 5 Characteristics of Services
• They are intangible – can only be felt. No
visual features like size, style.
• They are inseparable from their service
providers – a 3P cannot deliver
• They cannot be standardized – custom made
and delivered
• Customers are involved to a great degree –
define the services
• They are perishable – cannot be stored for
delivery later. Salvage value of an unsold
service is zero.
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29. Channels Used
• Shorter channels than for products
• Some channels used are:
– Direct from service provider to user
– Agents or brokers to bring buyer and seller
together
– Franchisees or contractors
– Electronic channels
• High degree of customization is provided
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30. Key Learnings
• Channel management is done by: use of power
bases, identifying and resolving channel conflicts and
co-ordination
• Channel conflicts could occur due to: goal conflicts,
domain conflicts and perception conflicts
• Channel conflicts pass thru’ the 4 stages of latent,
perceived, felt and manifest.
• Conflicts are avoided with the use of power bases of
rewards, coercion, expertise, legitimacy and
reference.
• There are 5 styles of conflict resolution: avoidance,
aggression, accommodation, compromise and
collaboration
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31. Key Learnings
• Channel conflicts are resolved by joint membership of
associations, exchanging personnel or arbitration
• Channel management involves the four steps of
planning, organisation structure, control of the
channels and measuring performance for continuous
improvement
• Services are distinguished by 5 characteristics of
being intangible, inseparable from service providers,
cannot be standardised, customers are involved in
service delivery and are perishable. Distribution
channels should take these into account.
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