The birth of a conflict

Channel conflict – the symptoms and contributing factors

Channel conflict is a scenario in which a channel member perceives the existence of another member to be counter-productive. It could arise between two different channels competing for the same sale with the same brand. A direct sales force for instance, competing with the local distributor for the same prospect. Channel conflict could also be the result of too many similar channels in the same geographic area.

Typically, when a new product is introduced into the market, companies invest in selective distribution channels. Once the product is accepted in the market and takes off, it enters the growth phase and subsequently the maturity phase in its life cycle. Here companies attempt to build intensive distribution channels. The main aim of the marketer is to maximise the market share. Adding customers to an existing base by introducing new features or promoting new usage, and identifying new users are common options.

In an attempt to cover all customer segments, companies are using a combination of traditional and unconventional distribution channels. Adding channels to the existing structure may result in increased presence, but it can also lead to channel conflict. Existing channels may feel threatened whenever new channels are included in the system.

Conflict – Symptoms
Channel conflict can sometimes lead to improved channel standards when the members start competing among themselves. It can also be destructive in nature, significantly impacting the channel structure and morale. If the manager can identify the symptoms of such conflicts, he can prevent damage.

Overlapping prospects: When multiple members of a channel compete for the same group of prospects, it can be interpreted as good market coverage. However, research shows that if the overlap exceeds 15 – 25 % of the channel sales, it can lead to trouble.

Eroding consumer satisfaction: If multiple channels are offering the same product, the consumer may experience redundant buying costs.

Member resistance: The retailer or the dealer may reduce support to your product by switching brands or providing a less-than-prominent point-of-display.

Drop in salesforce productivity: A conflict between the direct salesforce and other channel members can lead to a drop in sales per representative and increase in management costs.

Change in consumer perceptions: If the channel conflict shifts the focus from product to price, it can change the way consumers perceive your product.

Channel conflicts - Factors
Market evolution – Increasing the competitive presence will provoke companies to step up channel activity. This may result in more scope for conflict.

Industry environment – The environment in which an industry operates will have a significant impact on the channel strategy. A change in this environment could lead to conflict.

Accounts – Addition of new accounts or changes in individual accounts can alter the channel strategy.

Strategic objectives –The strategic direction of the business is adapted to the changing scenario. If the channel strategy is also not modified, it can lead to conflict.

Despite a channel manager’s best efforts to design a channel structure that is both effective and efficient, the channel may not always work according to plan. He therefore needs to constantly monitor the strategic environment for potential of conflict.

Related Reading:
”Unlocking the Mystery of Channel Conflict Management”; Cullotta, Carl; www.franklynn.com, Oct. 2000