1. in the Marketing Channel
Chapter 4
Behavioral Processes
in the Marketing Channel

2. Marketing Channel as Social System
Objective 1: 4
Marketing Channel as Social System
Social System
Generated by any process of interaction on the sociocultural level
Occurs between 2 or more actors
“Actor” can be an individual or a collective
Marketing Channels are Social Systems in addition to Economic Systems

3. While cooperation is the goal…
Objective 2: 4
Behavioral Processes
While cooperation is the goal…
Channels are constrained by 4 factors
Conflict
Power
Roles
Communication

4. Conflict ≠ Competition
Objective 3: 4
How Conflict Emerges
Conflict occurs when one actor perceives another actor’s actions as impeding the attainment of one’s goals.
Conflict ≠ Competition
Conflict is direct, personal, and opponent-oriented
Competition is indirect, impersonal, and object-oriented

5. Causes of Channel Conflict
Objective 4: 4
Causes of Channel Conflict
7 General Causes for Conflict:
Role incongruities
Resource scarcities
Perceptual differences
Expectational differences
Domain disagreements
Goal incompatibilities
Communication difficulties

6. Conflict and Channel Efficiency
Objective 5: 4
Conflict and Channel Efficiency
Does conflict
decrease
efficiency?
Can conflict increase
efficiency?
How does conflict
affect channel
efficiency?
Does conflict have
any affect?

7. Effects of Channel Conflict4
Effects of Channel Conflict
3 Possible Efficiency Outcomes
Negative Effect
Diminished efficiency as quarrel continues
Positive Effect
Increased efficiency as actors look inward
No Effect
Conflict is seen as superficial and dependency/commitment as more important

8. Managing Channel Conflict
Objective 6: 4
Managing Channel Conflict
Detecting
conflict
Managing
Conflict
Appraising the
effect of
conflict
Resolving
conflict

9. Detecting Channel Conflict4
Detecting Channel Conflict
No precise principles or guidelines, but…
Regular surveys of other members’ perceptions of firm’s performance
Perform routine channel audits
Form an advisory council or member committee OR OR

10. Appraising the Effect of Conflict4
Appraising the Effect of Conflict
Subjective process that relies on the manager’s judgment from past experience

11. Often relies on creativity, but some suggestions include…4
Resolving Conflict
Often relies on creativity, but some suggestions include…
Channel-wide committee
Joint goal setting
Establishment of a Distribution Executive (e.g., CLO or CSCO)
Applicability is often a function of size…

12. Power in the Marketing Channel
Objective 7: 4
Power in the Marketing Channel
Power
The capacity of an actor to control or influence the behavior and actions of another
Keys to understanding Power…
Dependency
5 Bases of Power
Uses of Power

13. Source of Power in Channels*4
Source of Power in Channels*
Power is a function of Dependency
Pab = Dba

14. The 5 Bases of Power and Control4
The 5 Bases of Power and Control
Reward Power
Coercive Power
Legitimate Power
Referent Power
Expert Power

15. Graph Provided in Class
Objective 8: 4
The Use of Power*
*Outside Material*
Graph Provided in Class
(i.e., Bucklin’s Theory of Channel Control)

16. Theory of Channel Control
Benefit
(eg, $)
Payoff Function
The amount of benefits (or profits) that accrue as a result of giving up control
Control Given Up

17. Theory of Channel Control
Benefit
(eg, $)
Tolerance Function
The amount of pain/burden felt as a result of giving up control to another.
Control Given Up

18. Theory of Channel Control
Benefit
(eg, $)
Zone of Indifference
Corresponds to the indifference of keeping/ending the relationship due to the costs associated with “breaking-up” an arrangement
Zone is the area between the Tolerance Function and the red line denoting the outside edge of the zone
Control Given Up

19. Theory of Channel Control
Benefit
(eg, $)
Area “A”
The only area where the Payoff Function is above the Tolerance Function, and it’s increasing
As one gives up more control initially, they experience greater benefit (e.g., why consultants exist)
Control Given Up A

20. Theory of Channel Control
Benefit
(eg, $)
Area “B”
The only area where the Payoff Function is above the Tolerance Function, but it’s decreasing
As one continues to give up control, the benefits begin to fall. Burden simultaneously begins to rise substantially as benefits continue to fall (i.e., steep rise in the Tolerance function).
Control Given Up A B

21. Theory of Channel Control
Benefit
(eg, $)
Area “C”
The area where the Payoff Function is below the Tolerance Function, and still in the zone of indifference
Here the burden felt outstrips the benefit gained, but there’s a cost assoc. w/ breaking up
Control Given Up A B C

22. Theory of Channel Control
Benefit
(eg, $)
What bases of power should be used in “A”? And why should the others not?
In stage A, the benefits far exceed the costs associated with giving up control. Consequently, the only bases of power one should use are referent power and expertise power. Both highlight that if they give up control they are going to benefit more. Legitimate power is not used as it would naturally push the individual from “A” into “B” as no one likes being told what to do and immediately creates more burden. There’s also no point in rewarding cause the reward would be wasted. Why would you reward when if they give up more control then they already benefit more. Not using coercive should be obvious to students as to why, but again, it parallels the rationales for why not to use legitimate and reward.
Control Given Up A

23. Theory of Channel Control
Benefit
(eg, $)
What bases of power should be used in “B”? And why should the remaining not?
In stage “B”, one is still making money and more than they were originally, but as they continue to give up more control, their benefit continues to go down and the amount of burden felt is dramatically going up with each additional amount of control given up. Consequently, the rational person would immediately say no more; I’m not giving up any more control. To overcome that rational response, they must be forced. Thus, one uses legitimate power here. Just like when a parent says “because I’m your parent and I said so.” The remaining powers, reward and coercive, are not used here because they both do the same thing, as to be discussed on the following slide, and they both only work in the short term.
Control Given Up A B

24. Theory of Channel Control
Benefit
(eg, $)
Why should the remaining bases of power be used in “C”? What do they do?
Only in stage “C” do you finally use reward and coercive power. This is because, as you’ll note, the rational person is already thinking about leaving as the amount of burden felt is outpacing the amount of benefit received. They simply haven’t yet because they’re still in the zone of indifference. Consequently, both of these powers are ideal because each works in a unique, yet short-term way. Both powers shift their corresponding functions (i.e., reward is paired with the payoff function and coercive is paired with the tolerance function). Consider if you place a dot on the payoff function somewhere in zone “C” then reward someone, what effectively happens is that dot becomes transported back into zone “B” because reward power works to shift the payoff function up, but only for a short period of time due to decreasing marginal utility. I always tell students consider you’re dating someone and about to break up cause you just can’t stand them anymore. Then the person gives you a very nice gift. All of a sudden that person isn’t as bad anymore, but that feeling only works for a short time. The same is true for coercive power, but it works with the tolerance function. Coercive power shifts the tolerance function down so that one shift back into zone “B” but only for a short time. I tell my students to remember when they were a kid and they were so annoyed with their parents that they didn’t want to listen and kept acting up (essentially they were in zone “C” ~ the amount of burden felt was much more than the payoff they saw from listening). I then ask them to remember when perhaps their dad threatened to spank them or give them some other type of punishment. That threat of punishment (i.e., coercive power) immediately made doing what they said not seem nearly as burdensome (i.e., they had been shifted back into “B”). But the same is true of coercive power regarding it’s applicability only in the short term. If someone constantly threatened to punish you the threat no longer holds as much weight and thus won’t work to shift you anymore.
Control Given Up A B C

25. Theory of Channel Control
Benefit
(eg, $)
Consider if someone was at the above “point”, what would the remaining powers do to get the individual to continue to give up power & not “end” relationship?
Control Given Up A B C

26. Theory of Channel Control
Benefit
(eg, $)
Reward power impacts one’s payoff function & shifts it up temporarily
Notice how the areas delineating “end” of “B” and “C” are changed…
Control Given Up A B C

27. Theory of Channel Control
Benefit
(eg, $)
Now consider how coercive power impacts the same (initial) scenario…(i.e., Slide 11)
Control Given Up A B C

28. Theory of Channel Control
Benefit
(eg, $)
Coercive power impacts one’s tolerance function & shifts it down temporarily
Notice how the areas delineating “end” of “B” and “C” are changed…
Control Given Up A B C

29. Roles in the Marketing Channel
Objective 9: 4
Roles in the Marketing Channel
Roles
A prescription defining what the behavior and actions of a position should be
Roles change over time
Straying far from one’s role may create conflict.
Roles provide insights into the constraints one might experience

30. Roles in Marketing Channels4
Roles in Marketing Channels
Questions to help the channel manager…
What role does the channel manager expect a particular channel member to play in the channel?
What role is this member expected to play by his or her peers?
Do the manager’s expectations for this member conflict with those of the member’s peers?
What role does this member expect the manager to play?

31. Communication Processes
Objective 10: 4
Communication Processes
Common behavioral problems in Channel Communications…
Differences in goals between members
Differences in the kinds of language used
Perceptual differences
Secretive behavior*
Inadequate frequency