Chapter 4

1. Chapter 4 Behavioral Processes in the Marketing Channel

2. Marketing Channel as Social System Objective 1: 4 • 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. Objective 2: 4 Behavioral Processes • While cooperation is the goal… • Channels are constrained by 4 factors • Conflict • Power • Roles • Communication

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

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

9. 4 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. 4 Appraising the Effect of Conflict Subjective process that relies on the manager’s judgment from past experience

11. 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. 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. 4 Source of Power in Channels* • Power is a function of Dependency Pab = Dba

14. 4 The 5 Bases of Power and Control Reward Power Coercive Power Legitimate Power Referent Power Expert Power

15. 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? 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? 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? Control Given Up A B C

25. 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

26. Roles in Marketing Channels 4 • 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?

27. 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