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Chapters 6 & 7:Behavioral Processes in
Marketing Channels
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Major Topics Challenges of Managing ChannelsMarketing Channels as a Social
System - A Conceptual Framework Major Building Blocks of the
Framework*–Economic Structure–Economic Process–Political Structure–Political Process
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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.
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Marketing Channel as Social Marketing Channel as Social
SystemSystem
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Social System
• Generated by any process of interaction on sociocultural level• Between two or more actors• Actor is individual or collectivity
Individuals or collectivitiesInteracting within marketing channel
=InterorganizationalSocialSystem
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Our Conceptual Framework: Political Economy Framework
Four Elements of Political Economy Framework*1. Economic Structure2. Economic Process3. Political Structure4. Political Process
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1. Economic Structure
- What We Learned = Channel Structure
- Ex1) Vertical Marketing System- Ex2) Market-Clan-Hierarchy
Trichotomy
- Roles and Expectations
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Roles in Marketing Roles in Marketing ChannelsChannels
A set of prescriptions defining what the behaviorof a position member should be
• Roles change over time. • Straying far from a role may cause conflict.• Roles help describe & compare the expectedbehavior of channel members and provides insight into the constraints under which they operate.• Role Stress: Role Ambiguity and Role Conflict
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Roles in Marketing ChannelsRoles in Marketing Channels
• 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?
Questions to help the channel manager
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2. Economic Process - Three Dimensions of Decision
Making1) Formalization2) Centralization
3) Participation- Three Elements of Economic
Exchange 1) Resource Exchange 2) Information Sharing 3) Collaboration
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3. Political Structure - Power-Dependence between Firms*
1) Motivational Investment in the Partner2) Replaceability of the Partner
- Strength of Ties1) Intensity: Past Resource Commitment2) Intimacy: Information Disclosure3) Reciprocity: Mutually Agreed Conditions
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44Power in the Marketing ChannelPower in the Marketing Channel
The ability of a particular channelmember to control or influence the
behavior of another channel member
Keys to understanding Power:
• Power Bases• Use of Power Bases
cf) Control
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Bases of Power for Channel Bases of Power for Channel Control*Control*
Reward Power
Coercive Power
Legitimate Power
Referent Power
Expert Power
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Using Power in the Marketing Using Power in the Marketing ChannelChannel
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 appropriatepower bases to better or
worsen channel relationships
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A’s Level of Investment in:
CoercionReward
LegitimacyExpertiseReference
Competitive Levels of:CoercionReward
LegitimacyExpertiseReference
A’s Offering to B:Coercion Reward
Legitimacy ExpertiseReference
DEPENDENCEOF B ON A
POWER OFA OVER B
FIGURE 8.1: THE NATURE AND SOURCES OF CHANNEL POWER
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• 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
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4. Political Process
- Communication & Use of Power
- Control = Achieved Influence
- Conflict
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Interfirm Communication
- Four Dimensions of Communication1) Content*2) Frequency3) Modality
4) Directionality - Influence Strategies**
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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
– Expertise, Reward
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Communication ProcessesCommunication Processes
Behavioral Problems in Channel Communications
1.Differences in goals
between manufacturers &
their retailers
2.Differences in the kinds of
language they useto convey information
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Communication Processes Communication Processes (cont’d)(cont’d)
Behavioral Problems in Channel Communications
3.Perceptual differences
among members
4.Secretive behavior
5.Inadequatefrequency
ofcommunication
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• 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
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FIGURE 7-2: NATURAL SOURCES OF CONFLICT: INHERENT DIFFRENCES IN VIEWPOINTS OF SUPPLIERS
AND RESELLERS
Supplier Viewpoint Reseller Viewpoint Expression of Clash
FinancialFinancial Goals Goals Maximize own profit by Maximize own profit by Supplier: You don’t put enough effort
- Higher prices to reseller - Higher own-level margins behind my brand. Your prices are too
- Higher sales by reseller (lower prices from our supplier high.
and higher prices to our Reseller: You don’t support me enough.
customer) With your wholesale prices , we can’t make
- Higher reseller expenses - Lower expenses (less support) money.
- Higher reseller inventory - Faster inventory turnover
(lower reseller stocks)
- Lower allowances to - Higher allowances
reseller from manufacturers
Focus on: Focus on:
DesiredDesired Target Target - Multiple segments - Segment corresponding Supplier: We need more coverage and
AccountsAccounts to resellers’ positioning more effort. Our reseller doesn’t do enough
(e.g. discounter) for us.
- Multiple markets - Our markets only Reseller: You don’t respect our marketing
- Many accounts - Selected accounts strategy. We need to make money too.
(raise volume and share) (those that are profitable
to serve)
Desired ProductDesired Product - Concentrate on our - Achieve economies of Supplier: You carry too many lines. You
And AccountsAnd Accounts product category and scope over product categories don’t give us enough attention. You’re
PolicyPolicy our brand disloyal.
- Carry our full line - Serve customers by offering Reseller: Our customers come first . If we
(a variation for every brand assortment satisfy our customers, you will benefit.
conceivable need , plus our - Do not carry inferior or By the way, shouldn’t you consider pruning
efforts to expand our line slow-moving items your product line?
outside our traditional (every supplier has some of
strenghts) these)
*Based on Magrath and Hardy (1989)
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Managing Channel ConflictManaging Channel Conflict
Detectingconflict
Appraising theeffect ofconflict
ResolvingconflictManaging
Conflict
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• Conflict Resolution Strategies1. Information-intensive mechanisms:
DAC, Personnel exchange
2. Third-party mechanisms: mediation and arbitration
3. Building Relational norms: flexibility, solidarity
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CONFLICT RESOLUTION STYLES
Accommodation Collaboration
or
Problem solving
Compromise
Competition
or
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)
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• Key Qualitative Outcomes – Trust
– Satisfaction
– Commitment
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CONFLICTLevel of tension, frustration, disagreement in relationship experienced by focal firm
ECONOMIC SATISFACTIONof focal firm: positive affective response to financialrewards derived from relationship or economic gratification
NON-ECONOMIC SATISFACTIONof focal firm: positive affective response to psycho-social aspects of relationship, or gratification from non-financial sector
TRUSTFocal Firm’s belief in counterpart’s honesty and benevolence
_
_
_
_
COMMITMENTFocal Firm’s desire to continue relationship and to sacrifice to build and maintain it
+
Based on Geyskens, Steenkamp, and Kumar (1999)
FIGURE 9.1: HOW HIGH LEVELS OF CONFLICT ERODE CHANNEL RELATIONSHIPS