Marketing Channel Conflicts

Conflict is an inherent behavioral dimension in all social system including the marketing channel. In any social system, when a component perceives the behavior of the other component to be impending the attainment of its goal or the effective performance of its instrumental behavior pattern, an atmosphere of frustration prevails. When this frustration is not resolved by the other component, a stage of conflict may exist. More over if the other component also perceive it as the blockage in its attainment of goal then both the components become objects of each other frustration and the conflict arises. In distribution channel, the same is also applicable. Here the conflict may be sales man versus distributor, distributor versus wholesaler, wholesaler versus retailer and so on. Some time in bigger organizations the conflict may arise between product company versus supply company, sales department versus production department. This type of channel conflict are more common in the organizations where every department is an independent cost center or profit center and its effectiveness is monitored separately.

Causes of Marketing Channel Conflicts

Various channel analysts have advanced a number of causes of conflicts. Robert Little point to such cause as misunderstood communication, divergent functional specialization and goals of the channel member and failing in joint decision making process. Some other experts suggest different economic objective and ideological differences among channel members as cause of conflict.

The most comprehensive list of causes of marketing channels conflicts are given below:

1. Role incongruities: A role is a set of perception defining what the behavior of position member should be. When applied to the marketing channel, any given member of the channel has a series to role to which he is expected to fulfil. For example a franchiser is expected to provide extensive management assistance and promotional support for his franchises. In return the franchisees are expected to operate in strict accordance with the franchiser standards operating procedure. If either of the franchisee or franchiser deviate from his role, conflict situation may result.

2. Resource scarcities: This refers to conflict stemming between channel members over the allocation of some valuable resources needed to achieve their respective goals. A common example of this is the allocation of resources between the wholesaler and the salesman. In the case both wholesaler and salesman as a valuable resource necessary to achieve their target view the retailer. Frequently the wholesale distributor decides to keep some of high volume retailers for himself as his accounts. This leads to objection by salesperson over what they consider to be an unfavorable allocation of resources. This kind of disputes is often one of the conflicts.

3. Perceptual difference: Perceptions refers to the way an individual selects and interprets environmental stimuli. The way stimuli are perceived however is often quite different from objective reality. In a marketing channel context, the various channel members may perceive the same stimuli but attach different interpretation to them. A common example of this is the case of sale material provided by manufacturing company for their retailer to put on at their retail counters. From the company point of view these sale material are valuable promotional tools needs to move their products of the retailer shelves. Whereas the retailer often perceives the material as useless junk which serves only to take up its valuable space.

4. Expectational difference: Various channel members have expectations about the behavior of the other channel members. In practice, these expectations are predictions or forecast concerning the future behavior of the other channel members. Sometimes this forecast turns out to be inaccurate but the channel members who make the forecast will take action based on the predictive outcome. By doing so, he can elicit a response behavior from other channel member which might now have occurred in the absence of the original action. An example of this could be seen at the retail end where a retailer expects stock on credit due to his past experience, now if the salesman, upon instructions of the distributor, tries to tightens the credit suddenly the retailer might refuse to oblige, resulting in possible conflict.

5. Decision domain disagreement: each channel member explicitly or implicitly carves out for himself an area of decision making which he feels is exclusively his own. In contractual channel system such as franchise, the decision domain is quite explicit and usually spelled out clearly in franchise contract. But in more traditional loosely aligned channels made up of independent firms, the decision domains are sometime up for grabs. Hence conflicts can arise over which member has the right to moves to make the decision.

6. Goal incompatibilities: Each member of the marketing channel has his own set of goals and objectives that are very often incompatible with those of other channel members. When goals of two or more members are incompatible, conflicts may result and incompatible goals often arise between channel members for example the most common conflict issues, which arise between manufacturer and industrial distributor.

  • How to handle large accounts
  • The required inventory stocking levels
  • The quality of distributors management
  • Size of distributor’s margin

Clearly underline many of these issues, are the difference in goals, aims and values among channel members involves. Furthermore in consumer goods market there are literally items of thousands of small retailer served by large manufactures. Large manufacturers tend to be growth oriented where as small retailers are more interested in status quo. The likelihood of the conflict is high in such situation is because in their pursuit of policies that re congruent with their dynamic goal. The former would likely adopt innovative programs that contradict the more static orientation of the latter.

7. Communication difficulties: Communication is the vehicle for all interactions among these channel members. Whether such interactions are cooperative or conflictive. A foul up or break down in the process of communication can turn quickly a cooperative relationship into a conflicting one. For example manufacture often make changes in product design, prices and promotional strategies. The resellers generally feel that they are entitled to ample advance notice of such changes so that they can make appropriate strategic adjustments, if necessary. If adequate communication is not provided and these failing results in negative consequences for a channel member, severe conflict can result.