power and conflict in consumer product channels. vendor rewards rewards can be realized in retailer...
TRANSCRIPT
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Power and Conflict in Consumer Product Channels
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Vendor Rewards
• Rewards can be realized in retailer gross margins
• Protection from competition– Exclusive territories, protection from
competition– Unique products/exclusive distribution
• Trade promotion/deals– Trade discounts– Cooperative advertising
• Information on retail competitors
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Retailer rewards
• “Category Management Privilege”
• Display space for an item– Intra-brand adjacencies on shelf/store– Location in store, visibility– Cooperation on promotional display
• Information on competing manufacturers
• Information on consumer purchasing
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Retailer Coercion, Coercive Power
• Dropping/de-listing a product, product line
• Reducing display space
• Poorer display space, comparative display
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Evidence of retailer coercive power in vendor concessions
• Unique SKUs– Sam’s Club SKUs, “variety flats”
• Slotting allowances
• Appearance in-store specials, undistributed print materials
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Vendor Coercion?
• Full-line forcing, tying arrangements, minimum resale prices—are all illegal.
• Discontinuing as a distributor (usually spelled out in contractual agreements), seldom attempted in administered channels.
• Supplier has little, if any, coercive power
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Expertise
• B’s perception that A has special knowledge, skills, experiences
• Examples:– Category management– Superior consumer research– Retailer pricing– Retailing costs and assignment of costs
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Referent/Identification
• Consistency in brands, approaches to brand management, target customers– Porsche/BMW and U.S. import dealers network– Clothing designers and more prestigious
department stores
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Legitimate
• Traditional power, usually grounded in the laws and customs:– Resale price maintenance– Exclusivity of territories– Non-competition clauses
• Tradition, religious origins, cultural origins– “Honor thy father and mother”– Inferiority of the hireling– Markup is an unethical behavior
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Conflict and interdependence
• When a channel member perceives the behavior of another to be impeding the attainment of its goals or the effective performance of its instrumental behavior patterns
• “Voice” versus “Exit”: Channel member will either express felt conflict or leave the channel.
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• Goal Incongruence
• Domain Dissensus
• Differing Perceptions of Reality– Differing perceptions of retail management
Conflict Types
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Goal Incongruity
• Suppose: – The retailer’s goal is to maximize the sale of
manufacturer’s line– The supplier’s goal was to maximize the profitability of
its retailers
• However—just the opposite is true:– The retailer’s goal is to maximize it’s profitability and
satisfy the needs of the local market.– The manufacturer’s goal is to maximize market share
and profitability of its brands.
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Actions affecting goals
• Procter & Gamble going to EDLP with distributors
• No more inside margin for grocery wholesalers
• Suppliers adding distributors
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Domain Dissensus
• The large customer and vertical competition
• Influencing the retailer’s operation
• Retailer requesting unique products, changes in production, packaging.
• Retailer influencing advertising
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Differing perceptions of reality
• Ignorance of the other channel member’s – Responsibilities, – Roles, – Priorities
• Discounting the other channel member’s – Sophistication,– Knowledge,– Experiences
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Economic sourcesInherent Conflict
• Nature of costs
• Fixed costs
• Marginal costs, variable costs
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Conflict Episodes
• Minor exchanges, requests• Denials of requests• Actions affecting competitors• Actions affecting directly affecting margins
(removal of deals)• Actions directly affecting volume (denying
a product)• Vertical competition
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Dysfunctional conflict
• Anti-competitive practices– Shifting business between competitors
• Lawsuits– Point of no return
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Conflict resolution
• Exchange of members
• Membership in trade associations
• Third-party arbitration
• Purchase
• Civil lawsuits