Channel Conflicts Caused By Using Third Parties for Distribution

Channel conflict occurs when a party in a marketing channel has the perception that another member(s) in the channel is engaging in activities that activities that prevent it from achieving its goal. Channel conflict enables an organization to plug loopholes in its system in a timely manner. This is enables an organization to maximize its performance. Channel conflict also keeps other channel members in their toes since decline in the performance of the members may lead to changes in channel arrangement (Pride et al. 2012).

Third parties refers to intermediaries that help in the  intermediation of services between two companies. For a company to use third parties in the distribution of its products it must have have measures that would help in identifying the right third parties for distribution. This necessitates the company to set certain requirements that the distributor must first fulfill. This would enable the relationship between the distributor and the company to be mutually fulfilling. Failure to have a good relationship with the distributor may make the distributor refuse to sell certain products of the company. This is one of the major channel conflicts that a company, which uses third parties for distribution of its products faces.  The third party distributors may prefer to sell the products of competitors. Offering incentives enables an organization to overcome this channel conflict. However, the incentives should not be offered haphazardly. The company should first identify determine the performance requirements of distributors. A company should also identify performance related factors that the third-party distributors may reject. This enables them to formulate incentives that match the bases of rejection by the channel (Pride et al. 2012).

Lack of a long-term perspective may also lead to channel conflicts in companies that use third parties for distribution. The company should ensure that it does bypass the third party distributor for short-term gains or terminating their services to avoid short term pains. The distributors may be opportunistic to the partnership with the company. This makes the relationship fail to be mutually beneficial to all parties. However, a long-term perspective does not imply that the manufacturer should have experience negative consequences from the relationship. It is vital for the relationship to be mutually beneficial to both the manufacturer and the third party distributor. The manufacturer and third party distributors may lack trust in each other. This is despite the fact that trust and dependence are critical in the development of long-term operation of the relationship between the company and the distributor. However, trust and dependence alone are not enough in the development of long-term relationships between a company and the third party distributor (Pride & Ferrell 2012).

Lack of legitimacy and compatibility between a company and the third party distributor may also lead to channel conflicts. Legitimacy and compatibility are some of the major factors that enable partnerships to have economic or shared values. Legitimacy may make a company or third party distributor view the partnership as a vehicle to enter into the market. Lack of resource sharing is one of the major channel conflicts that exist among companies that use third parties for distribution. It is vital for partnerships to ensure that they have synergistic resource sharing. This enables the partnerships to attain economies of scale, which improves their cost effectiveness. Shared relational, organizational, and information resources is more important in the long-term than the human resources or finances available in the partnership. Toyota is one of the companies that uses resource sharing to improve its competitiveness. The company provides its partners with information that help in improving their knowledge. This improves the relationship between Toyota and its distributors. Partner relationship management is the key factor that helps in development of information resources and sharing between partners. The information shared between the partners should be honest and timely to be effective (Pride & Ferrell 2012).

Dual distribution refers to a situation where a manufacturer or wholesaler uses more than one channel at the same time to enable products to reach consumers. In dual distribution, a company may sell a product directly to consumers or sell the product to other companies for resale. Using different channels to attract a certain market segment may lead to channel conflict. Business format franchising is one of the types of dual distribution. In format franchising, the franchisor issues other parties then right to operate certain units while concurrently owning and operating certain units themselves. The overlapping independent channels may lead to channel conflicts. This is due to the fact that there may be competition for market demand among the different locations.  This is despite the fact that the price of the basic product or service in the different locations may be the same across the line of product. Most companies use dual distribution since the purchase preferences and experiences of customers may vary according to the customer, location, customer service, and product assessment. These factors may influence the channels of distribution that various customers prefer. Dual distribution enables companies to have access to different customer segments. This increases the ability of a company to increase market demand and size of the market share. Having multiple channels of distribution simultaneously increases the market presence of a product. This increases customer awareness and the possibility of creating brand loyalty among new and existing products (Pride et al. 2012).

Channel conflicts may arise if the distributors and other companies desire to keep profits to themselves despite thw fact that they may be in a difficult environment to operate in. A company can reduce channel conflict due to dual distribution by using direct distribution. This is due to the fact that it enables a company to determine marketing channels where customers are not fully services, which increases the market share of a company. Direct distribution enables a company to provide its products or services to customers who may have found it difficult to obtain the products or services. Therefore, a direct distribution strategy may enable a company build a sustainable competitive advantage over its rivals (Pride et al. 2012).

 

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