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Exist?
Middlemen often perform the needed
functions at a lower cost than either the
customer or the manufacturer could by
themselves.
The first step in designing a distribution
channel for a given product is to
determine what objectives the channel
must accomplish and their relative
importance.
Market information
Middlemen are often relied on for fast and
accurate feedback.
A high level of channel feedback is particularly
important for firms in highly competitive
industries.
Feedback is crucial for prospectors.
Flexibility
Firms pursuing prospector strategies in new
or rapidly growing or technically turbulent
product categories, consider this important.
A flexible channel is one where it is relatively
easy to switch channel structures or add new
types of middlemen.
Consumer promotions
Trade promotions
Take-Aways
The importance of good distribution
decisions in designing a marketing plan is
simple: Customers wont buy your good or
service unless it is conveniently available
when and where they want to buy it.
Take-Aways
Distribution channel decisions have a
major economic impact because
distribution costs often exceed the costs of
producing a good or service.
Take-Aways
Channel design involves decisions about
the appropriate types and numbers of
middlemen to include in the distribution
channel in order to link the marketing
strategy for the good or service to the
needs of the target customers.
Take-Aways
Distribution channels can be designed to
accomplish a number of objectives,
including:
Maximizing the products availability,
Satisfying customer service requirements,
Encouraging promotional effort,
Obtaining timely market information,
Minimizing distribution costs, and
Maintaining flexibility.
Take-Aways
A manufacturer or service provider can
attempt to gain the support and direct the
efforts of its channel partners:
Through vertical integration,
By legal contracts,
By providing economic incentives, and/or
By developing mutually beneficial
relationships based on trust and the
expectation of future benefits.
CHANNEL CONFLICT
Channel Conflict
A channel conflict may be defined as A
situation in which one channel member
perceives another channel member(s) to
be engaged in behavior that prevents it
from achieving its goals.
Conflict is opposition, disagreement or
discard among the organizations.
Channel Conflict
Conflict is not always undesirable.
It is needed to have positive effect as
loopholes in the existing system can be
plugged timely and performance can be
maximized.
It can keep other channel members on
their toes knowing that a decline in
performance might lead to a change in the
channel arrangements.
Types of conflict
Each channel member views the conflict, the relationship
and the tensions differently. Following are the types of
channel conflicts
Latent conflict The channel members may be
unaware about the opposition. They do not fully sense
the conflict. This is due to the separate or un-conflicting
goals.
Perceived conflict The channel members sense that
some sort of opposition of perceptions, of interest, or of
intensions exists. It is more psychological, i.e. two
organizations can perceive that they are in disagreement
but their individual members do not consider it as a very
serious issue.
Types of conflict
Felt conflicts When channel members not only
perceive the opposition or disagreement but also feel it
actually they are felt or affective conflicts. This needs to
be sorted out at a early stage to avoid further
consequences.
Manifest Conflict If felt conflicts are not managed in
time and properly, they can become manifest or overt
conflicts and these conflicts stop the cooperation and
understanding between two organizations and block the
other from achieving its goals.
Functional Conflict When channel members accept
that there is opposition and disagreement but actually,
this opposition will improve their relationship, it becomes
functional conflict. It is common, obvious and sometimes
desirable too due to the interdependence of channel
members on each other.
Vertical conflict
Horizontal conflict
Inter type conflict
Multi Channel conflict
Vertical conflicts
Vertical conflicts occur due to the
differences in goals and objectives,
misunderstandings, and mainly due to the
poor communication
Lack of role clarity and over dependence
on the manufacturers. For e.g. Today the
large retailers dominate the market and
dictate the terms. Hence there are often
conflicts between these giant retailers and
the manufacturers.
No co-operative advertisements.
Manufacturers do not share any expenses
of advertisements.
No or inadequate credit offered to the
intermediaries. Margins / commissions are
not sufficient and there is no periodic
revision of commission and other terms
Horizontal conflicts
Horizontal conflicts are the conflicts
between the channel members at the
same level, i.e. two or more retailers, two
or more franchisees etc. These conflicts
can offer some positive benefits to the
consumers. Competition or a price war
between two dealers or retailers can be in
favor of the consumers.
Multi-channel Conflict
Multi-channel conflict occurs when the
manufacturer uses a dual distribution
strategy, i.e. the manufacturer uses two or
more channel arrangements to reach to
the same market.
Manufacturers can sell directly through
their exclusive showroom or outlets. This
act can affect the business of other
channels selling manufacturers brands.
Multi-channel Conflict
Manufacturers can bypass the
wholesalers and sell directly to the large
retailers. Conflict becomes more intense
in this case as the large retailers can enjoy
more customers and so the profit due to
offering more variety and still economical
prices, which is possible due to a volume
purchase.