Behavioural processes in marketing channels

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Behavioural processes in marketing channels

• Module 5, chapters 4 9

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Lecture Overview

• The marketing channel as a social system
• What is conflict?
• Competition versus conflict
• Seven major causes of channel conflict
• Roles
• Impact of conflict on channel efficiency
• Managing channel conflict
• Five bases of power
• Effective use of power

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• Marketing channel communication problems
• Motivating channel members

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The marketing channel is a social system

• Inter-organisational system
• involves interactions between organisations
• Behavioural dimensions of systems include
• conflict, power, roles and communication
  processes
• need to be managed

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What is conflict?

• when a member of the marketing channel
  perceives another members actions to be impeding
  the attainment of his or her goals (p. 121)
• inherent in the channel (normal)
• three types of conflict
• horizontal
• intertype
• vertical

You promised delivery today!
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Conflict v competition

• Competition is
• object-centred
• impersonal
• indirect
• need not interfere with goal attainment
• Conflict is
• opponent-centred
• personal
• direct
• interferes with goal attainment

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Causes of conflict

• different perceptions
• decision domain disagreements
• different expectations
• incompatible goals
• communication problems
• scarce resources
• role incongruity

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Role is.

• A set of prescriptions defining what the
  behaviour of a position member should be
• Role clarity
• roles and responsibilities are clear
• Role ambiguity
• not clear
• Role conflict
• disagreement over roles and responsibilities

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Effects of conflict on channel performance

• may be negative, neutral or positive
• negative effect (dysfunctional)
• as conflict increases, channel channel
  performance decreases
• neutral effect
• conflict does not effect channel performance
• positive effect (functional)
• as conflict increases, channel performance
  increases

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Impact of conflict on channel efficiency
Channel efficiency
Positive
Negative
Neutral
0
C1
C2
Conflict level
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Effects of negative conflict

• Low cooperation
• Poor communication
• Inefficiencies
• Poor performance
• Reduced competitiveness

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Managing conflict

• Early detection
• survey of channel members perceptions
• marketing channel audit
• advisory councils or committees
• Appraise effects of conflict
• figure 5.2 (study guide p. 5.8)
• frequency, intensity and importance of disputes
• Resolve dysfunctional conflict

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Conflict zones
frequency
frequent
High zone
occasional
Medium zone
infrequent
Low zone
major
occasional
minor
low
minor
intensity
medium
high
importance
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Managing and resolving conflict

• Four basic processes
• persuasion
• change perspective or attitude
• problem solving
• based on trust and cooperation

If we work together, we might get this square peg
in that round hole!
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• negotiation and bargaining
• compromise
• politics
• intervention of relevant 3rd party

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Specific conflict management mechanisms

• channel-wide committees
• joint goal setting
• distribution executive
• arbitration
• fast, secret, inexpensive, industry experts
• autonomous information gathering unit
• change management program
• bargaining and negotiation
• participative leadership
• joint problem solving

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Appropriate mechanism depends upon .

• cause of the conflict
• size and structure of the channel
• degree of vertical integration in the channel
• cost of implementing the mechanism
• time available to solve the conflict
• relative power bases of members involved

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What is channel power?

• control or influence over other channel members
  behaviour
• interdependency of channel members
• potential power and exercised power
• six major bases of power

Obey or be punished!
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Reward power

• ability to reward other channel members
• for example
• better discounts or terms
• promotional allowances
• first access to new products
• early order filling and delivery
• better shelf space and position

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Coercive power

• ability to punish another member
• for example
• remove rewards
• sabotage programs
• slow delivery
• unfilled orders

Pow!!
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Legitimate Power

• Two types
• 1. traditional legitimate
• right to lead the channel
• requires acceptance by other members
• 2. legal legitimate
• contract

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Referent power

• other channel members seek association with that
  member
• image
• company image
• store image
• brand image
• market success

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Expertise

• knowledge (not information)
• for example
• manufacturers have product and production
  expertise
• wholesalers have inventory management and order
  processing expertise
• retailers have merchandising and customer service
  expertise

Professor Bones
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Information power

• access to information and useful data
• for example
• competitive information
• forecasts and demand
• product availability
• customer information
• scanning data

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The effective use of power

• what power base is available?
• how will channel members react?
• how effective is each base in gaining cooperation
  or compliance?
• what are the short and long term impacts?

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Mediated v non-mediated bases of power

• Refer table 5.3 (study guide, p. 5.13)
• Mediated bases (more tangible)
• i.e. reward, coercion, legal-legitimate
• Consequences
• low cooperation
• high conflict
• low predictability of compliance
• high need for supervision
• short term response

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• Non-mediated bases
• i.e. information, expert, traditional-legitimate,
  referent
• Consequences
• high cooperation
• low conflict
• high predictability of compliance
• low need for supervision
• long term response

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Who holds the power in the channel?

• May be at any level
• May be domain or situation specific

I am the greatest!
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Suppliers are more powerful when.

• only a few large suppliers
• many buyers
• product is essential and few substitutes
• product can be differentiated
• switching costs are high for buyers
• supplier could easily integrate forward

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Buyers are more powerful when.

• only a few large buyers
• products are standardised (commodities)
• substitutes are available
• switching costs for buyers are low
• buyers could easily integrate backward
• buyers have influence over customers

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Marketing channel communications

• Effective and efficient communication
• Relevant, timely, accurate information flow
• Refer to figure 9.1, p. 284
• direct and indirect information flows
• Five major communication problems
• language differences
• different goals
• perceptual differences
• secrecy
• inadequate frequency of communication

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Motivating channel members

• Need to gain and maintain the support of channel
  members
• secure loyalty and commitment
• Motivating channel members involves
• determine their needs and problems
• develop tailored motivational programs
• provide leadership and direction

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Determining channel members needs and problems

• Needs vary across type, size, goals etc.
• Formal information system
• Figure 9.1, p. 284
• Other sources of information on channel members
  needs and problems include
• surveys
• audits (refer to table 9.1, pp. 288-9)
• advisory councils

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Developing motivational programs

• Planned not ad-hoc
• Tailored to needs
• consider cost, equity and goodwill
• Three levels of motivational program

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Three levels of motivational program

• Cooperative arrangements
• Refer to table 9.2, p. 292 for various types of
  programs
• Partnership or strategic alliance
• Refer to figure 9.3 for basic principles of
  building successful channel partnerships
• Distribution programming
• Refer to table 9.5 for an outline of a programmed
  merchandising agreement

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Summary

• marketing channel is a social system
• conflict v competition
• seven major causes of channel conflict
• roles
• impact of conflict on channel performance
• managing channel conflict
• six bases of power
• effective use of power
• mediated v non-mediated bases of power
• managing marketing channel communications
• motivating channel members

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Tutorial Program

• Case 6 Barnes and Noble College Bookstores, p.
  569
• Activity 5.2, part (a)
• Activity 5.3, part (b)
• Activity 5.5, part 3
• Activity 5.6
• Activity 5.7, part 3
• Activity 5.9
• Activity 5.11, part 1