Presentation Transcript

1. Part 1: Marketing Channel Systems

   Behavioral Processes in Marketing Channels

2. The marketing channel as a social system Behavioral processes How conflict emerges Causes of channel conflict Conflict and channel efficiency Managing channel conflict Power in the marketing channel Basic research findings Roles in marketing channels Communication processes
3. Marketing Channel as Social System 1 Social System • Generated by any process of interaction on sociocultural level • Between two or more actors • Actor is individual or collectivity Individuals or collectivities Interacting within marketing channel
4. Behavioral Processes 2 Conflict Roles Power Communication
5. How Conflict Emerges 3 When a channel member perceives that another member’s actions impede the attainment of his or her goals Cause Behavioral trademarks Direct, personal, and opponent-centered behavior
6. Causes of Channel Conflict 4 Role Incongruities Resource Scarcities Perceptual Differences Differences of Expectations Decision Domain Disagreements Goal Incompatibilities Communication Difficulties
7. Conflict & Channel Efficiency 5 Does conflict decrease efficiency? Can conflict increase efficiency? How does conflict affect channel efficiency? Does conflict have any affect?
8. Effects of Channel Conflict Negative Effect: Reduced Efficiency As the level of conflict increases, Channel efficiency declines
9. Effects of Channel Conflict No Effect: Efficiency Remains Constant Exists in channels characterized by high level of dependency among members Channel efficiency is not affected
10. Effects of Channel Conflict Positive Effect: Efficiency Increased Conflict might be impetus for either or both members to reappraise their policies Channel efficiency increases
11. Managing Channel Conflict 6 Detecting conflict Appraising the effect of conflict Managing Conflict Resolving conflict
12. Detecting Channel Conflict Regularly survey other members’ perceptions of firm’s performance Perform marketing channel audit OR Form distributors’ advisory councils or channel members’ committees OR
13. Appraising the Effect of Conflict Subjective process that relies on manager’s judgment
14. Resolving Conflict Creative action on the part of some party to the conflict is needed if the conflict is to be successfully resolved. Conversely, if conflict is simply “left alone,” it is not likely to be successfully resolved and may get worse.
15. Power in the Marketing Channel 7 The capacity 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
16. Bases of Power for Channel Control Reward Power Coercive Power Legitimate Power Referent Power Expert Power
17. 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
18. Basic Research Findings 8 Classic Findings 1. Expert and referent power in conventional channels may be more effective than direct monetary incentives or threats in inducing channel members to accept controls. 2. Power employed by manufacturers based on economic rewards or coercion provided a higher degree of control over channel members than power based on legitimacy, expertise, or reference
19. Basic Research Findings Non-coercive power bases increase satisfaction in “weaker” channel members, such as franchises 1. Franchisees are likely to have higher morale. 2. Franchisees are more likely to cooperate with the franchisor. 3. Franchisees are less likely to terminate their contracts. 4. Franchisees are less likely to file individual suits against the franchisor. 5. Franchisees are less likely to file class action suits. 6. Franchisees are less likely to seek protective legislation such as the “Franchise Full Disclosure Act” (1970).
20. Basic Research Findings General Inferences from findings 1. Power must be exercised to influence member behavior. 2. Effectiveness of power bases to influence members is situation-specific. 3. The exercise of power and how it is used affects the degree of cooperation, conflict, and satisfaction among channel members. 4. The use of coercive power probably promotes conflict and dissatisfaction to a greater degree than the other power bases. 5. The use of coercive power can reduce channel’s stability and viability.
21. Roles in Marketing Channels 9 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.
22. 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?
23. Communication Processes 10 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
24. Communication Processes Behavioral Problems in Channel Communications 3. Perceptual differences among members 4. Secretive Behavior 5. Inadequate frequency of communication
25. Discussion Question #2 Bill Schwartz, the owner of Newvalue Supply, a medium-sized wholesaler of plumbing supplies, was furious. He had just gotten off the phone with the sales manager of Jefferson Industries, the manufacturer of a very profitable line of high-quality faucets that Newvalue had been selling for several years. “That SOB is now going to start selling the big home center accounts directly,” fumed Bill Schwartz to his son Paul. “We’ve worked real hard to establish this line and then, when it finally gets going with some real volume, Jefferson wants to cut us out,” he continued. Discuss the possible underlying causes of the conflict that seems to be emerging in this situation.
26. Discussion Question #3 Amoco, one of the nation’s largest oil companies, has been forcing a number of its independent service stations to convert from full-service stations offering repair service to convenience stores or “gas only” stations. Thus the highly profitable repair part of the business will no longer be available to those station owners forced to convert. The franchised independent dealers have little choice but to give in to Amoco because the oil company typically owns the station’s land and buildings and offers leases of only three years or less. This arrangement appears to vest all of the power with the producer and virtually none with the dealers. Discuss this situation in light of the bases of power and the possible
27. Discussion Question #6 In the summer of 2009, Walmart, the world’s largest retailer, left no doubt about its enormous power in the marketing channel. Walmart announced to all manufacturers whose products it sells that they must adhere to Walmart’s new “green” environmental initiative. The manufacturers must estimate and disclose the environmental costs of producing their products and then allow Walmart to use that information to develop a “green” rating system that will be disclosed to consumers on product labels. The cost of the “green” program will be borne entirely by the 100,000 Walmart suppliers. Although the program will take a number of years to fully implement, some parts of it may be in place by as early as mid-2011. Suppliers will not be able to opt out of this program. So all of them, from the largest to the smallest, will have to participate. If they do not, Walmart has made it clear that those suppliers will likely be dropped by the giant retailer. What power base(s) appear to be in play in this situation? What do you think Walmart is trying to accomplish here by exercising its great power in the marketing channel?