Causes of Channel Conflict
One cause of channel conflict is goal incompatibility. The manufacturer may want to achieve rapid market penetration through a low-price policy, but the dealers prefer to work with high margins for short-run profitability. Another cause is unclear roles and rights, including issues of territory boundaries and credit for sales. A third cause is differences in perception, as when a producer is optimistic about the economy and wants dealers to carry higher inventory, but its dealers are pessimistic. Finally, channel conflict can emerge from intermediaries’ dependence on the manufacturer. For example, the fortunes of exclusive dealers, such as auto dealers, are profoundly affected by the manufacturer’s product and pricing decisions.
Managing Channel Conflict
Some channel conflict can be constructive and lead to better adaptation to a changing environment, but too much is dysfunctional.45 The challenge is not to eliminate all conflict but to manage it better through mechanisms such as: strategic justification (showing channels or members how each serves distinctive segments); dual compensation (paying existing channels for sales made through new channels); superordinate goals (for mutual benefit); employee exchange (between channel levels); joint memberships (in trade groups); co-optation (including leaders in advisory councils and other groups); diplomacy, mediation, and arbitration (when conflict is chronic or acute); and legal recourse (if nothing else proves effective).46
