Channel Conflict: Horizontal & Vertical Conflict

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  • 0:05 Channel Power
  • 2:54 Horizontal Conflict
  • 3:54 Vertical Conflict
  • 4:55 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
A marketing logistics plan can have channel conflict. This occurs when channel members do not agree with pricing, distribution or even logistical operations. The channel member's ultimate goal is to create a comprehensive channel partnership to eliminate any conflict and drive product efficiently to consumers.

Channel Power

Everyone wants power! Power can be used to influence people, maintain control and even force decision-making. In marketing channel development, certain members of the channel have more power. Channel power is when a certain marketing channel member controls or influences the behavior of other channel members. A powerful channel member is usually a manufacturer or a retailer. The channel leader or channel captain is the member who assumes channel leadership and exercises authority and power. In the local metropolitan area, Cheap-Mart is the perfect example of a channel leader. They have the ability to control the retail price, inventory and post-sales follow up.

Channel Conflict

Not all channel relationships are smooth in nature. Traditionally, channel members have difficulty agreeing. Channel conflict is when there is a clash of goals and methods between distribution channel members. Some conflict can actually be good for the overall marketing channel relationship. For example, Cheap-Mart does not accept retailers' practices of offering in-store coupons. They only will stock the lowest prices and demand the price-cut without having customers use coupons. The Cheap-Mart demand actually benefits consumers in the long run, as it saves them time and money.

Channel conflict can also occur because of conflicting business goals. For example, Cheap-Mart wants to sell as much candy as possible during the Halloween season. The retailer does not care if it's Sugar Rush, Hershey, Mars or Willy Wonka brand. Whereas, the individual channel member manufacturers do care who gets the best shelf space and the most support from Cheap-Mart.

Another area of conflict that can occur is when one channel member fails to fulfill expectations of another channel member. This can happen due to communication issues or not following member guidelines. For instance, Cheap-Mart believes that their customer is always in the right, and they also offer a very generous return policy. The manufacturers do not like getting large product returns. Since Cheap-Mart is the channel leader with the most power, the manufacturers have to play by Cheap-Mart's rules or not have their products stocked. This, in turn, would result in a huge loss of sales since Cheap-Mart is the largest retailer in the area.

Horizontal Conflict

There are two distinct types of channel conflict that can occur in the marketing channel system. Horizontal conflict happens with channel members who are on the same level, such as two different retailers who both stock the manufacturer's product line. The stores Save Value and Cheap-Mart both carry Sugar Rush's candy line. Save Value believes that Sugar Rush offers Cheap-Mart special deals on their candy that they don't have access to. For example, at Halloween, Cheap-Mart got special pumpkin flavored candy treats in an extra-large value bag for the price of $9.99. Sugar Rush did not offer Save Value the same product selection. In order to pacify Save Value, Sugar Rush had to create a popcorn flavored value bag with the same price offering. This type of channel conflict is usually viewed as healthy because it keeps competition fierce and equal.

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