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General Articles

Channel Conflict

Company Profiles:

Companies Using Direct
Selling as a Primary
Distribution Strategy



What levels of
distribution intensity
do these companies
General Articles

Choosing Distribution Methods by Business Owner's Toolkit. An overview of the most common distribution channels and links to five steps for selecting distribution and sales force representation. Summaries of several of those steps:

Strength, Weakness, Opportunity Threat (SWOT) Key questions and factors to consider in selecting distribution channels, such as: "What are the barriers (difficulties) to entering this product category via each distribution channel?" and "How much do various distribution channels cost to successfully enter? Over what period of time is this money being spent?"

Matching Distribution to Your Goals Read about the decision-making process a gourmet cooking equipment company followed in determining its best approach for distribution and sales force representation. This includes an initial list of options, the advantages/disadvantages of each and the reasons for their final choices for distribution channels.

Prioritizing Distribution Options A long list of possible distribution channels for food supplements and vitamins is used to emphasize that small businesses, with their limited resources, must set priorities. The article continues by listing the key factors to consider in deciding which distribution channels to pursue first. The article also includes links to two case studies about how business owners make distribution decisions.

World Federation of Direct Selling Associations "The mission of the WFDSA is to support direct selling associations in the areas of governance, education, communications, consumer protection and ethics in the marketplace and to promote personal interaction among direct selling executives regarding issues of importance to the industry." The site includes a code of conduct towards consumers.

Channel Conflict

Unlocking the Mystery of Channel Conflict Management by Carl Cullotta, Frank Lynn & Associates. An introduction to channel conflict and how companies can manage it. The article includes:

Key points for keeping channel conflict in perspective, such as: "Lack of any channel conflict in a marketing strategy usually indicates gaps in market coverage."
Reasons why channel conflict evolves, such as manufacturers using too many of the same type of reseller within the same geographic market.
How to recognize destructive channel conflict (ex. excessive competition among resellers for the same customer) and when
Common marketing problems that may cause a perception of channel conflict. (ex. Inconsistent pricing structures may inadvertently result in advantages for one channel over another)
Six key questions to determine if channel conflict needs to be assessed, such as "Have you experienced significant loss of market share or declines in customer satisfaction in any customer segments?"
Channel conflict: When is it dangerous? by Christine B. Bucklin, Pamela A. Thomas-Graham and Elizabeth A. Webster, The McKinsey Quarterly, 1997, Number 3, pp. 36"”43. (Free registration required before reading McKinsey Quarterly articles.) The first section of the article covers four questions a company must answer in determining if destructive channel conflict is present:

"First, are the channels really attempting to serve the same end users?"
"Second, do channels mistakenly believe they are competing when in fact they are benefiting from each other's actions?"
"Third, is the deteriorating profitability of a griping player genuinely the result of another channel's encroachment?"
"Fourth, will a channel's decline necessarily harm a manufacturer's profits?"
The article continues with ten ways to manage channel conflict. For example, if two or more channels target the same customer segments, the manufacturer can assign exclusive territories to each channel. Extensive examples from major corporations, including Black & Decker, Levi Strauss, GE, Coca-Cola and Nike, illustrate how channel conflicts can be addressed.

The Impact of Direct Internet Sales of Personal Computers on Traditional Retail Channels by Leanne Keck, Aneta Marcheva, Gus Valen and Stephen Years. "In this paper we will analyze the impact of direct Internet sales of personal computers on the three major links in the value chain: Original Equipment Manufacturers (OEM's), Distributors, and Retailers. We will also provide an overview of Internet users, on-line shopping demographics and projections, as well as analyze the benefits and drawbacks of on-line shopping from the consumer's perspective. Lastly, we will provide a strategic framework for OEM's who are looking to incorporate the Internet into their sales mix."

Question: After reviewing the online stores for Compaq, Dell, Gateway, Hewlett-Packard and IBM, which one do you think does the best job of selling its products online? Include a list of the criteria you used in comparing the companies and how they rated on each. Explain what led you to your conclusion.

The Impact of 'E-Tailing' by CMPnet. Compaq makes an effort to minimize channel conflict by stopping online retailers ("E-tailers") from reselling its computers.

Questions: Considering the fact that E-tailers promote and sell Compaq's computers, why is Compaq trying to cut them off as resellers? What do you see as the advantages and disadvantages for Compaq in taking this action?
What's New in Cybertalk? by Jean Gora, Resource Magazine, November 1998. Extensive quotes from insurance companies concerning whether or not to sell their insurance policies directly to customers via the Web. They debate the advantages and disadvantages, such as the risk of alienating their current networks of insurance agents who sell their policies. Although the focus of this article is specifically on the insurance industry, the issues of channel conflict are broadly applicable in other business sectors.

Levi Strauss begins 1st online sales effort by Alice Z. Cuneo, Advertising Age, November, 1998. Brief summary of Levi's plans to sell its products at its Web sites"”a potential channel conflict with its retailers, such as Sears and J.C. Penney.

Question: Do you think the decision by Levi Strauss to open its own online store will be worth the risk of alienating its current retailers? Why or why not?

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