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Channel Conflict

Topic 8

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There are many ways or channels by which information, products or services reach customers.

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From a business point of view the world could be seen as a number of different channels to reach customers

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The use of the Internet as a channel to reach consumers has lead to potential channel conflict

Example

Doc Martins

Dell

Lonely Planet

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• Who owns the customer relationship?

• Potential confusion with customers themselves in terms of how they were interacting with businesses.

e.g. Franchises

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There are synergies between channels such as catalogues and

the Internet

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Catalogues, interact through the Postal Service, call centres, TV etc

Companies can also set up web sites as another channel for distributing a product

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Email is still the major channel of the Internet. Issues include SPAM, and overfull in-baskets

Main focus today – the web

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It’s not a simple matter to open up this major new channel because it creates a lot of questions about; well, who owns that channel to the consumer? Is it the upstream manufacturer?

Types of Conflict

• Direct – Manufacturers launch new channel

• Internal Conflict – new online competes with existing offline

• External – manufacturer doesn’t own online or offline channel – least threatening

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Does the consumer have a relationship with the manufacturer or the retailer?

Does selling online make sense?

Is industry as a whole moving online?

Degree of dependency or interdependency

Manufacturers market position

Strategic Factors

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Even though consumers may buy the product from somewhere else, they’re heading to the manufacturer if there is a problem (or blaming the brand at least).

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There has always been a need to control a company name and the brand names around its products and services

The Internet may change these things.

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Ultimately, when the Internet comes into the mix, it causes conflict between the different channels.

e.g. Brand name camera, laptop etc purchased online

Example – buying your own brand…..(P&G Head and Shoulders)

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• Businesses have to meet the needs of the consumer in terms of where the consumer wants to interact and when and how, and so they can’t simply say; well, the Internet is just too difficult for us. We’re not going to do it.

Example: Delta and Expedia.

Virgin Vs Commonwealth

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Definition

• Channel conflict can be defined as any situation where two different marketing or distribution channels are competing for the same sale with the same brand,

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Where does conflict show itself?

• Pricing• Order handling• Delivery• Service and repair• Customer service• Resistance to change

Is channel conflict good?

• Is channel conflict healthy or inevitable?• Levels

– Vertical (manufacturer vs. retailer)– Horizontal (dept. store goods sold at Costco)

• Sources– Different goals

(e.g., build brand vs. immediate profits)– Loss of sales (commissions) Mattel’s website

How to manage channel conflict

1. Understand channel members interests and anticipate of conflicts

2. Set clear goal

3. Communicate your intentions clearly and provide information and training

4. Take strategy decisions which limit conflict

– Clinique’s web price

– Apple’s stores

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Minimising Conflict

• Customer first and the channel second• Involve channel partners• Capture value

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Conclusion

• Channel conflict will not go away by itself

• Needs active management• There are many positive examples today

such as multi‑channel strategies