1. Chapters 6 & 7: Behavioral Processes in Marketing Channels

2. Major Topics Challenges of Managing Channels
Marketing Channels as a Social System
- A Conceptual Framework
Major Building Blocks of the Framework*
Economic Structure
Economic Process
Political Structure
Political Process

3. Challenges in exercising power and achieving control in marketing channels
Loose alignment between channel members
Central direction is lacking
Single ownership is often missing: intensity
Formal authority is absent
Reward and penalty system is not precise
Central planning is rare.

4. Marketing Channel as Social System4
Marketing Channel as Social System
Social System
• Generated by any process of
interaction on sociocultural level
• Between two or more actors
• Actor is individual or collectivity =
Interorganizational
Social
System
Individuals or collectivities
Interacting within marketing channel

5. Our Conceptual Framework: Political Economy Framework
Four Elements of Political Economy Framework*
1. Economic Structure
2. Economic Process
3. Political Structure
4. Political Process

6. 1. Economic Structure Ex1) Vertical Marketing System
- What We Learned = Channel Structure
Ex1) Vertical Marketing System
Ex2) Market-Clan-Hierarchy Trichotomy
Roles and Expectations

7. Roles in Marketing Channels
A set of prescriptions defining what the behavior
of a position member should be
• Roles change over time.
• Straying far from a role may cause conflict.
• Roles help describe & compare the expected
behavior of channel members and provides insight
into the constraints under which they operate.
Role Stress: Role Ambiguity and Role Conflict

8. 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?

9. 2. Economic Process 1) Formalization 2) Centralization
- Three Dimensions of Decision Making
1) Formalization
2) Centralization
3) Participation
Three Elements of Economic Exchange
1) Resource Exchange
2) Information Sharing
3) Collaboration

10. 3. Political Structure 1) Motivational Investment in the Partner
- Power-Dependence between Firms*
1) Motivational Investment in the Partner
2) Replaceability of the Partner
- Strength of Ties
1) Intensity: Past Resource Commitment
2) Intimacy: Information Disclosure
3) Reciprocity: Mutually Agreed Conditions

11. Power in the Marketing Channel4
Power in the Marketing Channel
The ability of a particular channel
member to control or influence the
behavior of another channel member
Keys to understanding Power:
• Power Bases
• Use of Power Bases
cf) Control

12. Bases of Power for Channel Control*
Reward Power
Coercive Power
Legitimate Power
Referent Power
Expert Power

13. Using Power in the Marketing Channel
1. Identify available power bases
Bases are a function of size of:
• producer or manufacturer
• organization of channel
• particular set of circumstances
2. Select and use appropriate
power bases to better or
worsen channel relationships

14. FIGURE 8.1: THE NATURE AND SOURCES OF
CHANNEL POWER
A’s Level of Investment in:
Coercion
Reward
Legitimacy
Expertise
Reference
DEPENDENCE
OF B ON A
U T I L I T Y
A’s Offering to B:
Coercion Reward
Legitimacy Expertise
Reference
Competitive Levels of:
Coercion
Reward
Legitimacy
Expertise
Reference
POWER OF
A OVER B
S C A R C I T Y

15. Countermeasures for balancing power asymmetry*
Develop alternative sources
Organize a coalition with other firms
Walk out of the relationship!
Raise the other party’s dependence on you
©McGraw-Hill Companies, Inc. 2002

16. 4. Political Process Control = Achieved Influence Conflict
- Communication & Use of Power
Control = Achieved Influence
Conflict

17. Interfirm Communication
- Four Dimensions of Communication
1) Content*
2) Frequency
3) Modality
4) Directionality
- Influence Strategies**

18. Behavioral Process in Marketing Channels IV: Using Power to Exert Influence
Influence Strategy
Promise
Threat
Legalistic
Request
Information exchange
Recommendation
Power Bases
Reward
Coercion
Legitimacy
Referent, Reward
Expertise, Reward
©McGraw-Hill Companies, Inc. 2002

19. Communication Processes
Behavioral Problems in
Channel Communications 1.
Differences in goals
between
manufacturers &
their retailers 2.
Differences in
the kinds of
language they use
to convey
information

20. Communication Processes (cont’d)
Behavioral Problems in
Channel Communications 3.
Perceptual
differences
among
members 4.
Secretive
behavior 5.
Inadequate
frequency of
communication

21. Major Sources of Channel Conflict*
Competing Goals
Different Perceptions of Reality
Clashes over Domains: Intrachannel competition
Multiple channels and Gray market
Threats by Channel Partner
©McGraw-Hill Companies, Inc. 2002

22. FIGURE 7-2: NATURAL SOURCES OF CONFLICT: INHERENT DIFFRENCES IN VIEWPOINTS OF SUPPLIERS AND RESELLERS

23. Managing Channel Conflict
Detecting
conflict
Managing
Conflict
Appraising the
effect of
conflict
Resolving
conflict

24. Conflict Resolution Strategies
1. Information-intensive mechanisms: DAC, Personnel exchange
2. Third-party mechanisms: mediation and arbitration
3. Building Relational norms: flexibility, solidarity
©McGraw-Hill Companies, Inc. 2002

25. CONFLICT RESOLUTION STYLES
Accommodation
Collaboration or
Problem solving
Compromise
Competition
Aggression
Avoidance
Low Assertiveness
High Cooperativeness
Cooperativeness: concern for the other party’s outcomes
Low Cooperativeness
Assertiveness: Concern for one’s own outcomes
High Assertiveness
Based on Thomas (1976)

26. Key Qualitative Outcomes
Trust
Satisfaction
Commitment
©McGraw-Hill Companies, Inc. 2002

27. FIGURE 9.1: HOW HIGH LEVELS OF CONFLICT ERODE CHANNEL RELATIONSHIPS
Level of tension, frustration, disagreement in relationship experienced by focal firm _
ECONOMIC SATISFACTION of focal firm: positive affective response to financialrewards derived from relationship or economic gratification _ _
TRUST Focal Firm’s belief in counterpart’s honesty and benevolence _
NON-ECONOMIC SATISFACTION of focal firm: positive affective response to psycho-social aspects of relationship, or gratification from non-financial sector +
COMMITMENT Focal Firm’s desire to continue relationship and to sacrifice
to build and maintain it
Based on Geyskens, Steenkamp, and Kumar (1999)