Chapter 4Recap of What We Have LearnedMajor Topics for Ch. 4Special Challenges in Exercising and Achieving Control in Marketing ChannelsMarketing Channel as Social SystemA Conceptual Framework for Understanding Behavioral Processes1. Economic StructureRoles in Marketing ChannelsRoles in Marketing Channels2. Economic Process3. Political StructurePower in the Marketing ChannelBases of Power for Channel Control*Using Power in the Marketing ChannelSlide 154. Political ProcessInterfirm CommunicationBehavioral Process in Marketing Channels IV: Use of Power: Influence StrategiesTypes of Control MechanismsHow Conflict EmergesSlide 21Conflict & Channel EfficiencySlide 23Slide 24Chapter 4Chapter 4Behavioral Processes in Marketing ChannelsRecap of What We Have LearnedMarketing Channel and ParticipantsNew Marketing ChannelsChannel and Marketing Strategy Channel DesignSelecting the Channel MembersMajor Topics for Ch. 41. Challenges of Managing Channels2. Marketing Channels as a Social System - A Conceptual Framework 3. Major Building Blocks of the Framework**–Economic Structure–Economic Process–Political Structure–Political Process4Special Challenges in Exercising 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.©McGraw-Hill Companies, Inc. 2002Topic 1Marketing Channel as Social SystemMarketing Channel as Social System 44Topic 2Social System• Generated by any process of interaction on sociocultural level• Between two or more actors• Actor is individual or collectivityIndividuals or collectivitiesInteracting within marketing channel=InterorganizationalSocial SystemTopic 3A Conceptual Framework for Understanding Behavioral Processes Four Elements of ”Political Economy Framework”*1. Economic Structure (of a Channel)2. Economic Process3. Political Structure4. Political Process1. Economic Structure - What We Learned = Channel Structure-Ex1) Vertical Marketing System-Ex2) Market-Clan-Hierarchy Trichotomy-Roles and Expectations44Roles in Marketing ChannelsRoles in Marketing ChannelsA 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 ConflictRoles in Marketing ChannelsRoles in Marketing Channels 33•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 manager2. Economic Process - Three Dimensions of Economics Decision Making1) Formalization2) Centralization 3) Participation-Three Elements of Economic Exchange 1) Resource Exchange 2) Information Sharing 3) Collaboration3. Political Structure - Power-Dependence between Firms*1) Motivational Investment in the Partner2) Replaceability of the Partner- Strength of Interfirm Ties1) Intensity: Past Resource Commitment2) Intimacy: Information Disclosure3) Reciprocity: Mutually Agreed Conditions44Power in the Marketing ChannelPower in the Marketing ChannelThe ability of a particular channelmember to control or influence thebehavior of another channel member Keys to understanding Power:• Power Bases*• Use of Power Basescf) Control44Bases of Power for Channel Control*Bases of Power for Channel Control*Reward PowerCoercive PowerLegitimate PowerReferent PowerExpert PowerEx) Wal-Mart vs. RubbermaidUsing Power in the Marketing ChannelUsing Power in the Marketing Channel441. Identify available power bases Bases are a function of size of: • producer or manufacturer• organization of channel• particular set of circumstances2. Select and use appropriatepower bases to better orworsen channel relationships15•Countermeasures for balancing power asymmetry in a relationship**•Develop alternative sources•Organize a coalition with other firms•Walk out of the relationship!•Raise the other party’s dependence on you©McGraw-Hill Companies, Inc. 20024. Political Process - Communication & Use of Power-Control Mechanism-Channel ConflictInterfirm Communication - Four Dimensions of Communication1) Content*2) Frequency3) Modality 4) Directionality - Influence Strategies18Behavioral Process in Marketing Channels IV:Use of Power: Influence Strategies•Influence Strategy–Promise–Threat–Legalistic–Request–Information exchange–Recommendation•Power Bases–Reward–Coercion–Legitimacy–Referent, Reward–Expertise, Reward–Expertise, Reward©McGraw-Hill Companies, Inc. 2002Types of Control Mechanisms - Three Formal Control Mechanisms1) Input Control2) Process Control3) Output Control- Two Informal Control Mechanisms 1) Communication 2) Clan Control = Norm-based Control44How Conflict EmergesHow Conflict EmergesWhen a channel member perceivesthat another member’s actions impede the attainment of his or her goalsDirect, personal, and opponent-centered behaviorBehavioral trademarksCause21•Major Sources of Channel Conflict*–Competing Goals–Different Perceptions of Reality–Clashes over Domains: Intrachannel competition–Multiple channels and Gray market–Threats©McGraw-Hill Companies, Inc. 200244Conflict & Channel EfficiencyConflict & Channel EfficiencyCan conflict increase efficiency?Does conflictdecreaseefficiency?Does conflict have any affect? How does conflict affect channelefficiency?23•Conflict Resolution Strategies1. Information-intensive mechanisms: DAC, Personnel exchange 2. Building Relational norms: flexibility, solidarity3. Third-party mechanisms: mediation and arbitration4. Litigation©McGraw-Hill Companies, Inc. 2002CONFLICT RESOLUTION STYLES* Accommodation Collaboration or Problem solving Compromise Competition or Aggression AvoidanceLow AssertivenessHigh CooperativenessCooperativeness: concern for the other party’s outcomesLow CooperativenessAssertiveness: Concern for one’s own outcomesHigh AssertivenessBased on Thomas