, , , , , , , , , ,

3 Strategies to minimize Distribution Channel Conflicts

Sales Channel conflicts arise when companies open up new ways to deliver services and goods to their final customers, thus bypassing existing channels. This of course creates concerns for existing trade partners. Depending on the power of these partners in the distribution chain and the revenue share they represent these conflicts are potentially dangerous. Based on our experience in supporting companies in setting up an effective Multi Channel management we found 3 strategies to reduce these conflicts.

    1. Ensure clear differentiation between the channels
      Channel conflicts are pre-programmed if there is no difference between the channels and thus all channels fully compete against each other. The less the overlap between channels, the less the conflict potential. A well designed Multi Channel Mix therefore ensures that the sales channels differ on

      • customer segments (e.g. International Accounts vs. National Key Accounts vs. Medium/Smaller B2B vs. Consumers)

      • their core tasks (e.g. brand promotion  vs. new customer generation vs. caring for existing customers by service)

      • the products they sell (e.g. separate product lines or even brands for specialized retail vs. category killers vs. online). What happens if you don’t follow that rule has been recently discovered by BMW  announcing to sell the electric I-Models and others over the internet thus creating conflicts with their existing sales.

      • services they offer (e.g. offering managed services / out tasking services to very big customers while selling pure hardware to smaller customers via dealers).

         

    2. Implement a consistent pricing and discount strategy
      You can reduce conflict potential by carefully designing your pricing in the different channels. That does not mean that prices should be the same. They should reflect differences in service, product availability and costs to serve. Channel partners should be able to achieve a decent margin to perform the tasks they are supposed to do.

       

    3. Communicate honestly and consistently
      Once you have designed a well-considered Multi Channel Strategy you should communicate it openly and consistently. Of course this will not avoid some hard emotional discussions (even threats) with existing partners that have concerns, but at the end of the day most partners will be open to a rational and honest argumentation. If your channel strategy is designed well and your existing partners can realize that you do not intend to create new competition in their core business you will manage sales channel conflicts successfully.