Page 103 - Marketing the Basics 2nd

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Establishing multiple channels comes with a new set of prob- lems. As new channels develop, they will eventually compete for the same customers and sales serviced by intermediaries in the other channels. Competing against firms that are supposed to be partners will lead to conflict.
CHANNEL CONFLICT
One of the sources of conflict is change. In the business world, market conditions change all the time: new players enter, old players exit, new technologies emerge, etc. Conflict exists in every business relationship. Marketing channels are no exception.
Vertical conflict occurs when the marketing channel system employed is a vertical market channel system. This type of conflict emerges when disagreements between the manufacturer and their intermediary cannot be reconciled. Horizontal conflict occurs when firms at the same level of the channel have conflicts with each other. Franchises often complain about pricing behaviour, or other activi- ties by other franchises operating in the same geographical region. Finally, hybrid channel conflict occurs when two or more channels compete for the same market. One approach used by Unisys was to pay commission on a sale to both channels. However they found it was quite expensive and only worked for a short time.
Managing the conflict requires tact, diplomacy and a sincere effort at finding common ground between the different parties. If less formal methods fail to resolve the issue, arbitration and media- tion may be required to resolve long-standing disputes.
BUILDING A MARKETING CHANNEL
Every company has its own methods of reaching its target customers. Because of the wide variety, we can only provide general guidelines on how to build and manage a marketing channel.
SETTING CHANNEL GOALS AND CHANNEL TYPE
The first step is to establish the goals of the channel. The main goal is to increase customer value; all other goals are secondary. Firms express their marketing objectives in terms of meeting targeted levels