Transcript Causes of channel conflict

Distribution Management
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Quiz
1.
2.
3.
4.
Name 2 disadvantages of being a Franchisor
Name 2 disadvantages of being a Franchisee
Name 2 advantages of being a Franchisor
Name 2 advantages of being a Franchisee
8+2
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Franchisor
Disadvantages
Advantages
•
•
•
•
•
•
•
Acquire funds
No direct ownership of Brand
Reduction in Distribution cost
Motivation is high
Co-operative advertising opportunities
Regulations limiting power
Loss of control:
–
–
–
–
–
Over brand
Over Distribution
Expansion programs
Financial situation
Corporate intellectual property
Franchisee
Advantages
•
Risk of failure minimized:
–
–
•
•
•
Business model proven
Products proven
Continuous service
Economies of scale
High return on investment
Disadvantages
•
•
•
•
No guarantees of success
Little say in expansion programs
Loss of some level of independence
Pricing model might may be a
disadvantage to the Franchisee
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Behavioral processes in
Distribution channels
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Behavioral processes in Distribution channels
DC as part of a
Social system
Channel power
•Reward Power
Channel conflict
•What is Channel
conflict
•Coercive Power
•Legitimate power
•Causes
•Conflict resolution
•Referent Power
•Expert Power
•Exercising Power
•Methods to solve
conflict
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Communication
in the DC
Behavioral processes in Distribution channels
Why is the psychological aspect of Distribution channels
important?
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
DC as part of a Social system
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Customer purchase process
1. Awareness of a need – Hunger
2. Information search – Page through the Mr. Delivery
menu
3. Purchase – Select a burger from Nando’s
4. Post purchase evaluation – Happy so put Number in
Cell phone for future reference
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Mr. Delivery Distribution channel
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
What will make you have a……
Positive experience
• Delivered in your expected
time frame
• Food was freshly prepared and
hot
• Price was not perceived as a
Rip off
• Delivery guy was clean and
neat
Negative experience
•
•
•
•
Food never delivered
Cold and soggy
Cost more than what they said
Delivery guy was smoking and
tipping ash on the package
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Customer purchase process
• Awareness of a need – Hungry again
• Information search –Get in your car and go to
MacDonald's
• Purchase – Order a Lucky meal
• Post purchase evaluation – Happy so think MacD’s are
great and go there again next time
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Channel power
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Channel power
• The ability of one channel member to control or
manipulate the behavior of another channel member
• Negative and positive power
6 Influencing Strategies
• Five sources (Rosenbloom)
–
–
–
–
–
Reward
Coercive
Legitimate
Referent
Expert
•Promise Strategy
•Threat strategy
•Legal strategy
•Request strategy
•Info exchange strategy
•Recommendation strategy
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Reward power
• One or more members of the
channel rewards one or more
of the others if they conform to
the expectations of the former.
• Normally a financial reward
•
•
•
•
Franchise agreements
Bonuses
Kick backs
Incentives
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Coercive power
• Opposite of Reward Power
• Penalty system if members of
the channel don’t comply to
others demands and
expectations
• Found when one or two parties
dominate the channel
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Legitimate power
• Basis is in a legal contract or
agreement
• Franchise /Franchisor
agreement
• Independent suppliers have
different power
– Discounting
– Specials
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Referent power
• Objectives of 2 or more
channel members are the
same
• Focused on same target
market.
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Expert power
• Knowledge and expertise from
one Channel member is used
to change the behavior of
other channel members
• Often seen in Monopoly
manufacturers.
• Info on consumer demo, psych
and geographic profile can be
used upstream as well.
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
6 Influencing strategies
• The Power is used in different strategies to influence behavior.
• Promise (Power source – Reward)
– Do what we ask and we will reward you.
• Threat ( Power source – Coercion)
– Don’t do what we ask and we will punish you
• Legal (Power Source - Legitimacy)
– Do what we ask cause you signed a contract
• Request (Power source – Referent, Reward, Coercion)
– Just do what we ask
• Info Exchange (Power source - Expertise, Reward)
– Lets show you in detail why we are asking you to do this
• Recommendation (Power source – Expertise, Reward)
– Lets work together to develop the best way in addressing the request
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Channel conflict
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Channel conflict
• Definition – a Situation in which one member of a DC perceives another
member as an adversary engaged in behavior designed to injure, thwart or
gain scarce resources at the expense of the original member
• Various causes of conflict in any DC
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Causes of channel conflict
Cause
NB points
1
Oversaturation
•To many intermediaries in a channel
•E.g. to many food franchises in a shopping centre
2
Stocking levels
•Stock levels in different parties in DC
•Different expectations especially from up stream
3
Direct / Indirect
channels
•Manufactures Reps calling on customers in
competition with Suppliers reps
•Prominent in Big customers
4
Regional / National
Distributors
•National Reps in conflict with regional reps
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Causes of channel conflict
Cause
5
Large Account
NB points
•Large corporate accounts serviced directly by
Manufacturer
6
Sales quotas
•Forcing intermediaries to adhere to Sales quotas
•No consultation in setting sales targets with
intermediaries
7
Market life cycle
changes
•Involvement by all intermediaries in determining
the position in LC
•All intermediaries to agree on compensation
8
New market
development
•Expansion of distribution coverage without
agreement by current intermediaries
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Causes of channel conflict
Cause
NB points
9
New product
launches
•Intermediaries might not agree or believe in the
new product
10
Channel tasks
•Disagreement re the specific responsibilities of
different intermediaries
11
Technology required
12
Training
•Advances in technology might bring Manufacturer
closer to customer and need less intermediaries
•Technology advances might be to expensive for
intermediaries to carry
•Differences in opinion re the training needs
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Causes of channel conflict
Cause
13
Phantom Channel
14
Single supplier
15
Overselling
16
Business
philosophies
NB points
•Unofficial vendors
•Supplier to stock only single range or
manufacturers goods
•New products being sold on quota basis
•Manufacturers = Bureaucratic
•Intermediaries = Entrepreneurial
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Causes of channel conflict
Cause
Pricing
•Conflict between Manufacturers and suppliers on
what the correct price to the consumer should be
Profit Margins
•Disagreement on what an appropriate level of
profit margin should be between manufacturer and
supplier
17
18
NB points
19
Resources
•Suppliers competing to get resources from
Manufacturer such as training, stock or delivery
schedules
20
Transhipping
•Suppliers selling products in another suppliers
geographical area.
21
Assigned markets
•Existing suppliers might be upset when they don’t
first rights on new products or markets
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Conflict resolution
Methods to resolve conflict
• Problem solving
– Super ordinate goals
– Communication process
• Persuasion
– Agreement to change objectives by all parties
• Negotiation
– All parties compromise on aspects of their goals
• Politics
– Coalitions
– Mediation / Arbitration
– Lobbying / Judicial appeal
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management
Communication in the DC
• Free flow of Comms is the best way to avoid and
dissolve any conflict in a DC
3 Behavioral problems that inhibit comms
• Perceptual differences
• Secretive behavior
• Infrequent communication
Hugo van Zyl
083-629 2069
[email protected]
Marketing 2B
Distribution Management