Power Equations of Distribution Channels

The use of power by individual channel member to affect the decision making or the behavior of other is the mechanism by which congruent and effective roles become specified, roles become realigned, when necessary and appropriate role performance is enforced.

There are a number of power equations that may be available to one channel member in his attempt to influence the other and vice versa.

1.  Reward power

2.  Coercive power

3.  Legitimate power

4.  Referent power

5.  Expert power

Let us discuss these power equations one by one

1. Reward power: – This refers to the capacity of one channel member to reward other if the latter conforms the influence of the former. This power base is present in virtually al channel system. The rewards are usually manifest in the perceived or actual financial gains, which channel member’s experience as the results of conforming to the wishes of another channel member. Channel member, whether a produce, wholesale or retail level will in the long run remain viable member only if they can realize financial from their channel membership.

2. Coercive power: – This is essentially the opposite of the reward power. In this case a channel member’s power over other is based on the expectation that former will be able to punish the latter, if he fails to conform to the formers influence attempts. It should be noted that threats and negative sanctions can be viewed as pathological moves and may be less functional over the long run. It may be less effective than other power basis that may produce positive effects. Therefore coercive power should be employed only when all other avenue to evoke changes has been traveled. In virtually every instance, where coercive power is used, over a period of time, the results have been resistance. Besides, if not remedied through more judicious management practices, the decline of channel may occur as a competitive force.

3. Legitimate power:– This power stems from internalized norms in the channel members which dictate that another channel member has a legitimate right to influence him and that he the obligation to accept that influence. In this inter-organizational system, as specified by a large business firm, legitimate powers are pervasive and more routinely accepted. At each lever in the chain of command the subordinate recognize that his superior has a legitimate right to influence his behavior and he has the obligation to accept such influence. Thus a sales man reports to sales manager expects to take order from him, who in turn takes the order from his superiors.

In an intra-organizational system, legitimate powers does not operate in the same fashion and is by no means it is pervasive or well accepted phenomena. Most of the time many channel are independent business firms. There is no definite superior subordinate relationship and there are no clear-cut lines of authority or chain of command. It is only in contractually linked channel that anything approaching an organization structure is legitimately bound to accept the other channel member instructions. On the other hand, for more loosely aligned marketing channel, legitimate power is virtually non-existent power equation.

A manufacturer selling through independent can not order the wholesaler to do something based on any legitimate power vested in the manufacturer which the wholesaler is obliged to accept. In general, the channel manager operating the loosely aligned channel can not rely on a legitimate power to influence his channel member. He must, instead, resort either to other power basis or attempt to restructure the channel in to more formal system such as contractually linked system in an attempt to increase his legitimate power basis.

4. Referent power: – When a channel member perceives his goal to be closely allied with or congruent with, that of another channel member, a referent power is likely to exist. They may see each other as both being on the same side. Hence when this situation prevails, and attempt by one channel member to influence the behavior of the other is more likely to be seen as by the latter as beneficial to the achievement of his goal. In order for referent power to be effective a good deal of empathy between channel members is necessary.

5. Expert power: – The base of power is derived from the knowledge or perception of knowledge which one channel member attribute to another in some given area. Thus one channel member attempts to influence the other’s behavior is based on his superior expertise. Expert power is quite common in marketing channel specially for industrial products. Many manufacturer and wholesaler, for example, have traditionally supplied retailers with management assistance relevant to various phases of the retailer operations. Retailers often make changes based on the advise out of respect for the expertise of the manufacturer or wholesaler who offers it. Retailers are often in excellent position to feel the pulse of the consumer market and send this information up through the channel. This influence that such has on the wholesaler or manufacturer will depend upon the perception of the retailer expertise.

Source: Scribd.com