What are some good suggestions for resolving channel conflict?

What is channel conflict

Marketing channel conflict, referred to as channel conflict (conflicts in channel), is the channel members through intentional or unintentional market behavior triggered by the existence of a variety of contradictions in the company's marketing channel system outside and inside the general term.

The existence of channel conflict is objective. There are many reasons for channel conflict, in essence, the marketing channel in the purchase and sale of business relationships exist and easy to produce conflicts. For example, vendors and channel members have different development goals and direction; vendors and channel members want their own inventory less, and hope that the other side to maintain more inventory. In addition, the tasks and rights of channel members are not clear, is also an important factor leading to channel conflict. In many cases, vendors and channel members have different perceptions of the market. For example, vendors expect the near-term economic outlook to be good, while channel members may not, and for this reason vendors want channel members to keep higher levels of inventory, while channel members believe that keeping higher levels of inventory is too risky.

More often than not, channel conflict has a direct cause. For example, the level of price differentials between different channel members, inventory levels, and competition between vendors and different channel members for large customers are all direct causes of channel conflict. In addition, vendors and channel members are trying to squeeze each other's funds, vendors and channel members of the after-sales service differences and channel members operating competing products are also important causes of channel conflict.

Channel conflict management is an important part of channel management. The full and correct understanding of the channel conflict and positive, effective solution is one of the important work of the channel manager. In the long run, the channel conflict of blindness or inability to take measures to avoid or reduce the generation of channel conflict, not only jeopardizes the stability of the manufacturer's channel system, but also directly affects the realization of the manufacturer's marketing objectives and customer satisfaction.

Types of channel conflict

There are different criteria for categorizing channel conflict. Based on whether the conflict occurs outside or inside the channel system, channel conflict can be divided into two categories: external channel conflict and internal channel conflict; based on the results of the conflict is good or bad, the channel conflict can be divided into two categories: benign channel conflict and malignant channel conflict.

We in this lecture will be in accordance with the conflict occurs outside the channel system or internal to categorize the explanation, and focus on the prevention of vicious channel conflict and handling of the introduction. As shown in Figure 1 is a typical categorization of channel conflict.

1. External conflict

External conflict, also known as homogeneous conflict, refers to a macro-market environment in a macro-market environment between the two manufacturers channel system in the same channel level of a conflict. This is also a channel conflict in the broad sense, mainly caused by market competition. The conflicts between vendor A and vendor B, between vendor A's master agent and vendor B's first-tier agent, and between vendor A's second-tier agent and vendor B's second-tier agent in the two channel systems in Figure 1 would be external homogeneous conflicts.

In most cases, external conflict contributes to each channel member within a channel system. This market competition caused by a channel system at different levels of the channel members of the *** with a sense of crisis, usually allows the channel system at all levels of the channel members united, the same enemy, so as to produce a positive upward momentum. Therefore, external conflicts are benign in most cases.

2. Internal Conflict

Internal conflict, that is, in the same channel system at all levels of the channel members of a conflict, that is, we usually say that the "system of internal friction". Figure 1 in the two channel system between the manufacturer and the general agent or first-class agents, the general agent or first-class agents and the second-level agents, and the second-level agents of the conflict between the internal conflict.

Based on the different hierarchical positions between the channel members that generate internal conflict, internal conflict can be divided into three categories, namely, horizontal conflict, vertical conflict and conflict between different channels.

Horizontal conflict is the conflict between different channel members at the same level in a vendor's channel system. In Figure 1, the conflict between second-tier agents X and Y in vendor A's channel system and the conflict between first-tier agents M and N and second-tier agents U and V in vendor B's channel system are horizontal conflicts. In marketing practice, horizontal conflict often occurs in the channel system divided into regional units. At present, many vendors in the Chinese IT market have established their channel systems on a regional basis, so there is a wide range of horizontal channel conflicts in the Chinese IT market.

Figure 1 A typical classification of channel conflict

Vertical conflict is the conflict between channel members at different channel levels in a vendor's channel system. In Figure 1, the conflict between vendor A and its general agent and between the general agent and the second-level agents X and Y, and the conflict between vendor B and its first-level agents M and N, as well as the conflict between M and N, respectively, and its second-level agents U and V are all vertical conflicts. Therefore, vertical conflicts are also known as upstream and downstream channel conflicts.

Conflict between different channels, only in the use of composite channel system of the vendor marketing system, it refers to the vendor in the segmentation of the target market after the establishment of a number of marketing channels, different marketing channels to the same target market of the conflict arising from the competition for customers. For example, in the marketing system of a manufacturer that does both direct marketing and distribution, the conflict that arises when mail sales in the direct marketing system compete for customers covered by some of the distribution system belongs to the conflict between different channels.

Whether it is horizontal conflict, vertical conflict or conflict between different channels, most of them, on the vendor's channel system of different channel members will cause some kind of greater or lesser harm, serious may also cause the vendor's channel system turbulence. Therefore, usually, the internal conflict are regarded as vicious conflict, is the marketing practice to avoid and try to solve the conflict.

Resolution of channel conflicts

As mentioned earlier, there are benign and malignant channel conflicts. The goal of the channel manager or channel director is not to avoid all conflicts, but to effectively utilize benign conflicts, try to avoid or resolve malignant conflicts, and try to turn the pressure of channel conflicts into the momentum of development, thus promoting the healthy development of the channel.

There are various ways to solve channel conflicts, including the development of superordinary objective, communication, negotiation, litigation and exit. However, the resolution of most channel conflicts is more or less dependent on power or leadership.

1. Development of super-goal

In summary, the development of super-goal, that is to say, for the channel system in the channel members to set up a *** with the development of the same goal, and this *** with the goal is usually a single channel members can not be achieved, but only the channel system of all members of the cooperation in the case can be realized. Typical super goals include channel survival, market share, high quality and customer satisfaction.

Developing super-goals is like a life-and-death situation in which the "internal must be secured before the external". Therefore, the development of super-goals is generally only applicable to the resolution of external conflicts. For example, when a manufacturer's channel system encountered another manufacturer's channel system of strong provocations to the extent that may be "channel destruction plant death" situation, the development of super-goal is the channel system of all channel members to immediately give up the internal struggle, and go all out to resist the external "aggression! "In order to survive.

2. Communication

Resolving channel conflict through persuasion is essentially utilizing leadership. In essence, persuasion is providing opportunities for channel members who are in conflict to communicate. Emphasis on persuasion to change their behavior rather than information **** sharing also serves to reduce conflict arising from the division of functions involved in the channel system. The importance of persuasion is to make each channel member clearly recognize that he or she is at a different level of the channel system and naturally needs to play the appropriate channel role and abide by the appropriate rules of the game.

3. Negotiation

The purpose of negotiation is to stop the conflict between channel members. In essence, negotiation is a method of bargaining between channel members. In the negotiation process, each channel member usually gives up something, thus avoiding conflict or preventing the conflict that has occurred from intensifying. However, the use of negotiation to resolve channel conflict depends on the communication skills of the channel members and whether they still maintain the willingness to cooperate.

4. Litigation

Channel conflicts sometimes need to be resolved with the help of external forces. For example, litigation, legal arbitration, etc. However, resolving channel conflict through litigation means that leadership in the channel is not working, i.e., communication, negotiation, and other means are no longer effective.

5. Exit

Exit, is to leave the original marketing channel system. Whether it is for the manufacturer or for other channel members, exit seems a bit cruel. However, the fact is that exiting a marketing channel system happens to be a common method of resolving channel conflict. When horizontal, vertical or inter-channel conflict is irreconcilable, exit is often the preferred approach. However, exiting from an existing channel system may mean breaking the contractual relationship with one or some channel members. Therefore, it is important to be careful before deciding to exit a channel system.

Scramming and its avoidance

1. What is scrambling

In marketing practice, "selling outside the region" is often referred to as "rushing" or "scrambling".

In marketing practice, "cross-border sales" is often referred to as "washout" or "tampering", which is specifically manifested in the channel members in order to obtain abnormal profits, the price of non-manufacturers to sell products to markets outside the jurisdiction of the behavior. The fundamental reason for tampering is that the nature of the flow of goods is from the low-priced area to the high-priced area of the flow, from the stagnant area to the best-selling area of the flow. The essence of channel members tampering is the unrestrained pursuit of interests.

In fact, tampering may be higher than the manufacturer of a region of the market price to the jurisdiction of the market outside of the "dump" behavior, may also be lower than the manufacturer of a region of the market price to the jurisdiction of the market outside of the "dumping" products. Behavior. Figure 2 shows a diagram of two types of tampering.

Figure 2 two kinds of tampering diagram

Suppose that Figure 2 for a market in a manufacturer's channel system is divided into A-F*** six small jurisdictions, each jurisdiction is responsible for the sales of a member of the channel, but due to geographic location, industrial structure and other differences in economic conditions, resulting in the B area and D area is very special, B area of the implementation of the manufacturer's lower pricing policy, belonging to the low-price area, D area of the implementation of the manufacturer's lower price policy, belonging to the low-price area, the D area of the implementation of the manufacturer's lower price policy, belonging to the low-price area. Zone B has a lower price policy set by the manufacturer and is a low price zone, while Zone D has a higher price policy set by the manufacturer and is a high price zone. In such a channel system, if the channel members in each jurisdiction strictly abide by the vendor's channel and pricing policies, this market will develop healthily. However, if a channel member in the A area in order to pursue abnormal profits, it to the B area of low-priced tampering, in essence, a dumping; and then to the D area of high-priced tampering, in essence, a dumping. The former belongs to the pursuit of sales volume, in order to win the manufacturer to different sales level difference given by different incentives or rebates. Low-price tampering attempts to obtain lagging abnormal profits, the risk is greater. The latter belongs to the direct access to abnormal profits tampering, less risky. But no matter what kind of tampering, will destroy the manufacturer's channels and price policy, causing conflict between the channels, therefore, should be actively avoided.

2. Causes of tampering

Usually, the tampering needs to have two conditions: First, the scale, the number of larger. From the wholesale link to jeopardize the normal market organization and business activities of the original channel members; Second, the price. Low or high prices directly disrupt the original channel members of the target market established price system.

Tampering with the price of the root cause of the current manufacturers and channel members of the simple sale of the distribution relationship. The direct cause of tampering, summarized in the following aspects.

One is the price system is chaotic. Currently, many companies in the product pricing is still using the traditional price system, that is, the total distribution price (ex-factory price), a batch, two batches, three batches of prices, and finally add a suggested retail price. Each step in this price system has a certain discount. If the total distributor directly do terminal, two of the ladder price discounts become quite lucrative profits, thus constituting the basis for its tampering.

The second is the sales settlement convenience. In the current market, the use of bankers' acceptances or other forms of settlement (such as barter) is very common. In these convenient settlement methods, most of the channel members to realize profits in advance or the current cost pressure is very small, out of accelerated capital turnover or encroachment of market share considerations, to profit subsidy prices, thus forming to the surrounding markets at low prices to tamper with goods.

Third is too high sales target. Even in the current market, many domestic manufacturers still lack or no market research consciousness, blindly to channel members to increase sales targets, and channel members in order to complete the targets issued by the manufacturer, at all costs to take non-legitimate means, it is very easy to induce or force the channel members to embark on the road of tampering.

Fourth, improper incentives for channel members. In order to incentivize channel members to improve sales, many manufacturers are channel members of the implementation of "year-end incentives" and other rebate measures. And usually, the more over-completion, the higher the year-end incentive. In this way, it leads to those who do the volume as the fundamental, only care about earning the year-end incentives on the channel members in order to win a higher number of differences, by any means possible to the outside "aggression", thus forming a tampering.

Fifth, the improper use of market promotion costs. Market promotion cost is a basic input for manufacturers to operate the market. Some manufacturers because of the lack of relevant planning talent, while forced to channel members of the pressure, according to a certain percentage of sales as a marketing costs allocated to channel members to use. Marketing expenses by the channel members of their own control, is tantamount to a disguised price reduction, resulting in a new price space, thus forming the basis of tampering.

Sixth, other reasons. For example, manufacturers and channel members of the unpleasant experience of cooperation, or manufacturers did not honor their commitments, resulting in channel members to retaliate, the formation of malicious low or high price tampering. There is also from the manufacturer's internal sales staff, out of their own interests, unauthorized changes in the direction of resource allocation, thus causing tampering.

3. How to avoid tampering

In fact, there is no tampering with the market, is not a red-hot market. The tampering phenomenon itself from a side to reflect the market demand for product signals. But a large number of tampering, must be very dangerous. The vast majority of tampering is due to manufacturers in the channel management loopholes. Therefore, in order to avoid or reduce the generation of tampering, manufacturers should start from the channel management, strengthen the macro-control.

One is to stabilize the price system. The establishment of a reasonable, standardized differential price system, and at the same time, strictly for their own retail terminals have members of the channel shipment management. Determine the total distribution price of the manufacturer's shipments for the CIF price, all freight costs in transit borne by the manufacturer, so as to ensure that all jurisdictions have the same price benchmark channel members.

The second is to adhere to the cash or short-term acceptance settlement. From the settlement means to control the channel members due to the profits realized in advance or short-term lack of the necessary cost pressure and the risk of tampering. The establishment of strict and effective early warning and control mechanism of capital utilization.

Third, the correct use of incentives. Incentives involving cash rebates and other incentives are prone to cause the sales of the price of the bad results. Therefore, sales incentives should take a number of indicators for a comprehensive assessment, in addition to sales volume, but also consider a number of other factors, such as price control, sales growth rate, sales profitability. Rebates are best not to use cash, more goods and other in-kind. Promotional expenses should be controlled as much as possible in the hands of the manufacturer.

Fourth, to strengthen market research and develop reasonable sales targets. Manufacturers should strengthen cooperation with market research organizations to strengthen market forecasting capabilities in order to develop reasonable sales targets.

Fifth, through the agreement to restrain the market behavior of channel members. Strengthen the use of sales contracts to constrain the market behavior of channel members. In the contract clearly add "prohibit cross-district sales" and other provisions, the channel members of the sales activities are strictly limited to their own market area. In the contract to clarify the differential price system, if possible, in the national market as far as possible to implement a uniform price policy, and strictly prohibit ultra-limited range of fluctuations. The year-end incentives and whether the tampering behavior combined with the assessment, so that rebates not only become a means of reward, but also become a warning tool.

Sixth, strengthen market supervision. The establishment of the market director, the establishment of the market inspector system, to stop the sales behavior across the region as a daily routine work unremittingly. For sales behavior across the region, to be severely punished, once found, to be punished according to the severity of the situation, the circumstances are serious, and even to interrupt the contractual relationship.