1. Conflict in Distribution Distribution Channel Strategy L. P. Bucklin Spring 2000

2. Channel Conflict Conflict occurs when a channel member perceives another member as unfairly or unreasonably blocking the former’s ability to achieve its independent goals – Conflict is direct, personal, opponent-centered – The presence of persistent conflict— May lead to neglect of responsibilities and departure Result in loss of coordination and performance

3. Roots of Conflict Conflict is likely to be minimal in open (market based) channels – Dependence is typically limited – Exit is often easy – Resources specialized to the relationship are small Potential for conflict increases— – As systems approach vertical integration and are unilaterally managed – Exit barriers become greater

5. Sources of Conflict Changes in system power balance, environment Unexpected changes in system policies, norms Dependence not offset by perceived reward Failure to achieve agreement on channel model The level and fairness of profit distribution The use of dual or multiple distribution channels The extensive use of coercion to achieve control The inability to achieve adequate profit return

6. Conflict Management Techniques Institutionalized methods Use of third parties Contract management Control over management style Effective incentive management System component evaluation

7. Institutionalized Methods Building joint governmental bodies – Dealer councils for discussions, presentation of new programs – Dealer associations, company or industry based – Joint decision making bodies for marketing decisions, e.g., advertising, product line determination Creating an internal appeals processes

8. Use of Third Parties Professional mediators Arbitration panels Courts Political entity behavior controls – Franchise regulations on information to provide to franchisees – Auto legislation limiting the termination of dealers

9. Contract Management Rolling contracts – Signing a new contract before the expiration of the old Contract length – Providing a contract of sufficient length to permit the channel member to recoup investment Use of mutual hostages, large sunk costs Clear expectation’s for partner performance Explicit conditions for termination

10. Management Style Top management contact across system members Expectations management through – Goal setting and achievement evaluation – Eliminating key relationship ambiguities Building trust and fairness – Consistency in dealings – Recognized concern of other member well being Encourage dependent parties to voice concerns Shared data and its use

11. Incentive Management Deployment of tested business models Limiting channel member overlap – Intra-channel territorial boundaries – Inter-channel market overlap Careful location selections Reduction of decision discretion Constraint in use forced promotional shipments Pricing to ensure system profitability

12. System Component Evaluation Customer satisfaction measures by resellers Careful channel member selection, training Performance evaluation sharing, discussion Reseller satisfaction measurement Prevention of free riding through consistent contract enforcement and performance evaluation