Distribution Channel Management: How To Avoid Channel Conflicts (2024)

Pricing power is one of the major determinants of profitability. Many brands who just started out would have already made a breakthrough if it hadn’t been for a lack of pricing power. Such lost opportunities and competitive advantage are often byproducts of poor distribution channel management that lead to conflicts. That’s why companies, alongside their pricing teams, must work together to avoid the predicament.

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While all businesses are at risk of distribution channel conflicts, the impact is greater for lesser-known brands. Suppose your company sells laptops with unique and interesting features – only your brand is not yet as popular as Apple, Samsung, or Dell. So, you utilised a multichannel distribution to reach more customers. Then suddenly, the business is confronted with a channel conflict that doesn’t align with uniform pricing. What’s a probable outcome?

A prospective buyer browses multiple online stores and discovered that the prices of your laptops vary substantially from one shop to the next. He then purchases a different brand because yours appeared suspicious, possibly of inferior quality. A wasted earning potential, isn’t it? So, how exactly can you prevent channel conflicts?

In this article, we guide you through distribution channels and the potential conflicts between them. First, we’ll go over the different kinds of channels. Then, we show how channel conflicts can undermine brand and product pricing power. Finally, we propose suggestions on how to avoid and manage channel conflicts.

At Taylor Wells, we believe that inefficient distribution channel management is reversible and can be improved. With research and careful planning, you can prevent channel conflicts and reap the benefits of using multiple channels. By the end, you’ll learn how to boost your pricing capabilities and avoid channel conflicts.

Distribution Channel Management: Preventing Channel Conflicts to Increase Pricing Power

What is distribution channel management?

Distribution channel management is the method of regulating the movement of products from the manufacturers or producers to the end customer. A distribution channel is a means to which businesses transport their products. It is an important aspect of business because it delivers products to retailers and customers in all feasible conditions.

Why is distribution channel management important?

Every business develops large quantities of products for prospective customers in several locations. Although these products are manufactured in a production facility, it is crucial to track how these products will be distributed to depots, wholesalers, merchants, and, finally, customers. Distribution channel management ensures an appropriate, cost-effective, long-term, and dependable supply chain, which enhances a company’s profitability.

For brand promotions, businesses experiment with various tactics. Some companies consider multichannel distribution and marketing strategy. Some succeed, while others, on the other hand, face obstacles within channel conflict. To understand channel conflicts better, let’s talk about channels first.

What are distribution channels?

A channel is a way for your products to be distributed. This includes the following:

1. Direct-to-customer distribution channels

Direct channels enable your business to produce and sell your products to your customers. Since it permits more personal interactions, this sales approach may be suitable for smaller enterprises.

Direct selling provides a unique and intimate way to connect with your target market, solve customer concerns, and manage your marketing strategy. Adopting this form of sales channel may entail selling to customers directly through your physical store.

2. Indirect distribution channels

Indirect sales channels are more intricate. In some circ*mstances, a company will manufacture a product and then sell it to a distributor. The wholesaler then offers the product to middlemen, who in turn sell it to target consumers.

Others manufacture a product and sell it to a collaborator, who then sells it to the customer. However, the partner will not be treated as a distributor. Adopting an indirect sales channel approach may require collaborating with actual retail chains such as JB Hi-Fi or Harvey Norman to sell in well-known stores.

3. E-commerce distribution channels

E-commerce offers a virtual, self-service link to your customers. Although websites do not provide one-on-one interactions, they are a lot more efficient and cost-effective when reaching a vast number of customers.

You can reach out to customers practically anywhere, at any time. Using this type of sales channel means selling on your own website or collaborating with online retailers like Amazon.

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What is a distribution channel conflict?

A multichannel approach involves various parties cooperating to produce, market, and transport the product. Examples of these parties are manufacturers, wholesalers, retailers, and resellers. When two or more of the sales partners disagree, channel conflict occurs.

Therefore, channel conflict is defined as when parties in sales processes are against one another. For instance, when a retailer refuses to sell products from a manufacturer due to price disagreements.

What are the types of distribution channel conflicts?

Based on the extent of disagreement and the concerned parties, a channel conflict can be classified into 3 categories:

1. Vertical Distribution Channel Conflict

In a vertical conflict, a channel partner at a higher hierarchy disagrees with a channel member from a lower level or conversely. For illustration, channel conflict among dealers and retailers or wholesalers and retailers can be considered vertical conflicts.

2. Horizontal Distribution Channel Conflict

Horizontal conflict refers to adispute between channel partners on the same tier. Examples of this type of issue include disagreements between two or more wholesalers or merchants from different locationsover pricing.

3. Multiple Distribution Channel Conflict

Vertical channel conflicts are uncommon, but when they do occur, and sometimes in conjunction with horizontal conflicts, the effects are severe. If a company sells its products through numerous channels, it may experience multi-channel conflict, which occurs when channel members participating in one distribution channel have a problem with another. This type of conflict frequently has wide-reaching consequences, even on a national scale.

How does distribution channel conflict destroy pricing power?

Pricing power reflects the impact of a change in a product price on its demand. Without optimal pricing power, your business may be unable to survive and flourish in the face of rising costs. Here are some of the ways channel conflict reduces your pricing power, as well as additional downsides:

1. Channel conflicts devalue brand and product.

When there is a channel conflict with a retailer, it may execute a price promotion on its website that is only available to its customers. Unfortunately, in just a few hours, pricing AIs utilised by other platforms will most likely detect this offering.

Without a question, they will swiftly imitate or possibly beat the promotion. This can result in reduced product price, decrease in product value, profit drop, and major damage to your brand reputation.

2. Channel conflicts lead to a sales slowdown.

Since prices are unpredictable during a channel conflict, customers will likely postpone their purchase until the price falls. Meanwhile, customers who already purchased a product only to discover that the price has lowered will feel deceived. Both scenarios lead to brand devaluation and lower sales.

3. Channel conflicts will further weaken distribution processes.

Businesses that are already seeing channel conflicts must address the issue as soon as possible. Prolonged disputes between sales partners frequently lead to the worst-case scenario. That is when distributors and resellers lose interest in promoting or even selling your products. Organisations that use a multichannel approach must avoid this if they do not want their brand to fail.

Distribution Channel Management & Conflict Prevention

Distribution Channel Management: How To Avoid Channel Conflicts (1)

1. Use distribution and sales channel resources to the fullest.

For direct-to-customer sales channels: Your sales department will necessitate resources to handle channel conflict and customer engagement, which includes aspects such as inside sales, outside sales, field sales, sales operations, corporate development, preorders, and technical or field engineering.

For indirect sales channels: When a collaborator conducts the sales activity, your resources are different. These may include accounting system management with an emphasis on training and co-marketing efforts.

For eCommerce channels: Maximise marketing and technical resource support from IT to generate engagements and increase sales.

2. Establish a unified selling strategy across distribution and sales channels.

To avoid channel conflict, your channels must establish distinct sales procedures. When sales processes are not coordinated, mainly in terms of account management and pricing, conflict is more likely to occur. Channels will compete for the same customers, therefore negating the purpose of growing your targeted market share.

For example, you cannot place your physical store adjacent to an indirect sales channel, such as a supermarket. Competing with them will not increase your brand awareness. Your sales procedures must have well-defined geographic and market coverage for each channel to eliminate overlapping and possible conflicts.

3. Implement a pricing system for all distribution and sales channels.

Being inconsistent will not help you. Setting certain rules for one channel but not applying them in the other may lead to channel conflict. We advise you to ensure that your pricing policies are uniform across sales channels so that no one has an edge over the others.

There are pricing solutions in making it easier to operate across sales channels. For instance, some technologies allow you to expand your product, content management, and IT resources.

We know that you want solutions that will fit into your CRM processes. Just make sure that the license includes an extension to other sales channels and that you do not need to pay for additional permissions. Furthermore, verify that your solution provides comprehensive pricing recommendations based on proven methods for the best pricing policy across all channels.

In fact, our findings show that with the right setup and pricing team in place, incremental earnings gains can begin in as little as 12 weeks. The team can capture at least 1.0-2.25% more margin after 6 months using well-researched price management techniques. After 9-12 months, organisations are frequently generating 3-7% higher profits every year as they find more complex and previously unrealised possibilities, efficiencies, and risks.

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Distribution Channel Management & Channel Conflict Resolution

The advantages of extending marketing across several platforms are too compelling to ignore. However, failure to synchronise prices across channels may result in serious channel conflicts. Let’s look at a real-world example of how an organisation used pricing to overcome channel conflict.

A company we know used to sell a product in-store for $25 whereas their online partner sells the identical item for $20. This snatched sales from retail establishments, having a substantial impact on their demand. To overcome this issue, they had to pick between lowering their price and terminating their partnership with the online shop. Admittedly, the first choice will reduce its profit margin, and the latter is impractical.

With the help of its pricing team, the company found the perfect answer to their dilemma with strategic pricing across its channels. To maintain higher prices, the company began selling the most updated or newest version of its products in its physical stores. Online partners, on the other hand, will only sell older versions to avoid competition and target a different demographic.

Finally, by adopting smart pricing across its existing channels, the brand was able to boost demand and accelerate sales growth while also minimising the likelihood of a channel conflict.

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Distribution channel management inefficiencies, resulting in channel conflicts, have a variety of negative consequences for any organisation, such as weakening a brand’s and its products’ pricing power. Disagreements and mistakes are an inevitable part of running any business, particularly those in the process of transformation and expansion. Nonetheless, companies looking to increase their distribution channels can reduce possible conflicts by maximising their resources and implementing uniform sales and pricing strategies throughout sales channels.

For a comprehensive view on integrating a high-performing pricing team in your company,

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Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

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Distribution Channel Management: How To Avoid Channel Conflicts (2024)


How can channel conflict be managed? ›

Channel conflict is managed by a combination of economics and controls. Economic solutions compensate channels fairly for functions performed and help direct channels away from actions that create destructive conflict.

What are the strategies that can be adopted to resolve distribution channel conflicts? ›

Mediation, Arbitration and Diplomacy

To resolve a dispute, the manufacturer can adopt the strategy of intervention where a third person intervenes to create harmony. The other option is arbitration, where an arbitrator listens to the argument of the parties involved in a conflict and declares a decision.

What is the best way to avoid vertical channel conflict? ›

While partners offer a wider reach, some may be using the same network, putting them at odds with each other. Vetting partners to ensure oversaturation and turf wars won't take place is a key part of avoiding both vertical and horizontal channel conflict.

How can distribution channels be managed effectively to reduce the possibility of conflicts and power struggles? ›

You can do this by offering exclusive products on your ecommerce site. For example, if a customer wants to purchase a personalized item, you can ensure that it can only be purchased on your site. This won't cause conflict with your existing channels as you are offering something different to a different market.

What are 5 ways to prevent conflicts? ›

6 Useful Tips for Prevention of Conflict in the Workplace
  1. Respectful Communication. ...
  2. Clearly Define Roles and Responsibilities. ...
  3. Encourage Employees to Work Together. ...
  4. Provide Ongoing Training. ...
  5. Encourage Humor. ...
  6. Resolve Conflict Early.

What are 3 ways you can reduce conflicts? ›

10 Conflict Resolution Strategies that Actually Work
  • Define Acceptable Behavior. ...
  • Don't Avoid Conflict. ...
  • Choose a Neutral Location. ...
  • Start with a Compliment. ...
  • Don't Jump to Conclusions. ...
  • Think Opportunistically, Not Punitively. ...
  • Offer Guidance, Not Solutions. ...
  • Constructive Criticism.
16 Oct 2018

What are the 7 strategies for managing conflict? ›

Share This
  • Deal with it. Most people prefer to avoid conflict. ...
  • Think it through. ...
  • Talk it out, face to face. ...
  • Use a mediator if necessary. ...
  • Apologize when appropriate. ...
  • Choose your battles. ...
  • Work to minimize conflict. ...
  • Work on your own communication skills.

What are the 4 ways to resolve conflict? ›

4 steps To resolve Conflict: CARE
  • Communicate. Open communication is key in a dispute. ...
  • Actively Listen. Listen to what the other person has to say, without interrupting. ...
  • Review Options. Talk over the options, looking for solutions that benefit everyone. ...
  • End with a Win-Win Solution.
13 Mar 2017

What are ways to improve your channel of distribution? ›

There are three high-level ways to increase channel efficiency: Increasing or carefully picking the channel intermediaries. Increasing the focus on supply chain management. Consolidating all channels into a single, strong channel.

What are the 5 main conflict resolution strategies? ›

According to the Thomas-Kilmann Conflict Mode Instrument (TKI), used by human resource (HR) professionals around the world, there are five major styles of conflict management—collaborating, competing, avoiding, accommodating, and compromising.

What are 8 strategies for resolving conflict? ›

  • Understand the situation. Few situations are exactly as they seem or as presented to you by others. ...
  • Acknowledge the problem. ...
  • Be patient and take your time. ...
  • Avoid using coercion and intimidation. ...
  • Focus on the problem, not the individual. ...
  • Establish guidelines. ...
  • Keep the communication open. ...
  • Act decisively.
1 Oct 2021

What are the best two methods of resolving conflicts? ›

Negotiation, mediation and arbitration, often called ADR or alternative dispute resolution, are the most well known. Whether you are involved in a family or neighborhood dispute or a lawsuit involving thousands of dollars, these processes should be considered.

What are the solutions for distribution problems? ›

  • The problem of distribution can be solved in an economy by the better allocation of resources and a developed market distribution system.
  • When the market system is developed, the goods are produced and pass through a proper channel or supply chain.
  • This ensures that goods effectively reach the end consumer.

What are four effective ways to communicate in order to reduce conflict? ›

In today's fiery, strife-filled interactions, here are four ways to de-escalate the situation with better communication:
  1. Cultivate genuine compassion. Extend empathy toward the other person(s) and their situation. ...
  2. Be inquisitive. ...
  3. Listen carefully to understand (not to respond) ...
  4. Speak respectfully.
4 Aug 2017

What factors would you use to support distribution channel? ›

Factors Affecting Choice of Distribution Channel – 5 Important Factors: Market, Product, Company, Channel and Environment Related Factors. There are several channels available for the purpose of distribution of goods.

How can conflicts be avoided? ›

If you respect other individuals, you will get respect in return. If a conflict arises among group members; make sure you address all the participants together. The issues and problems must be addressed on an open forum. Personal favours and biases must be avoided for a peaceful environment.

What are 10 types of conflict prevention? ›

10 things you can do to avoid conflict in your team
  • Listen first, talk second. ...
  • Set clear expectations. ...
  • Encourage collaboration. ...
  • Spend significant time on new projects and new hires. ...
  • Discourage gossip and gossipers. ...
  • Get to know the different personalities in your team. ...
  • Encourage friendships. ...
  • Don't criticize, complain or blame.
13 Sept 2013

How do you avoid conflict management? ›

The avoiding conflict style is one of five styles of conflict management: Accommodating style.
Moving away from avoiding mode
  1. Be aware of your tendency to withdraw.
  2. Role play with a friend or therapist, talking through workplace conflicts that you may want to avoid.
  3. Write out a plan of action.
8 Aug 2021

What is an example of avoiding conflict? ›

1. Simply Ignoring the Issue at Hand. A common form of conflict avoidance is to deny there is an issue at all. As an example, two colleagues might disagree regarding an approach to a particular problem.

What is one way to minimize or resolve conflict? ›

You can avoid many confrontations and resolve arguments and disagreements by communicating in a humorous way. Humor can help you say things that might otherwise be difficult to express without offending someone.

What are the six steps to managing conflict? ›

Let's take a look at the Six-Step Method for Resolving Conflict.
  1. Define the problem. ...
  2. Come together and communicate. ...
  3. Establish relationships. ...
  4. Develop an action plan. ...
  5. Gain commitment. ...
  6. Provide feedback.

What are the 4 types of distribution strategies? ›

Distribution Strategies Types
  • Direct distribution. Direct distribution involves the manufacturer taking orders and sending its products directly to the consumer. ...
  • Indirect distribution. ...
  • Intensive distribution. ...
  • Selective distribution. ...
  • Exclusive distribution.
1 Jul 2022

How do you control a distribution channel? ›

One way to control a channel of distribution is through vertical integration. A business must replace some or all of the marketing intermediaries down the line by taking over their activities. The range of intermediaries between producer and consumer includes wholesalers, retailers, agents and brokers.

What are the key tools for reducing conflict? ›

Here are some tools for avoiding and resolving disputes in the early stages, before they become full-blown conflicts:
  • Stay Calm. ...
  • Listen to Understand. ...
  • Accentuate the Positive. ...
  • State Your Case Tactfully. ...
  • Attack the Problem, Not the Person. ...
  • Avoid the Blame Game. ...
  • Focus on the Future, Not the Past.
17 Jul 2019

What are the major challenges facing every distribution channel? ›

Companies seeking to increase data sharing and collaboration across their supply networks have faced three principal hurdles.” Those include trust issues, the operating model, and technology.

Why are distribution strategies important? ›

Distribution strategy helps to improve the way customers interact with your business, leading to customer satisfaction and repeat business. It can also help you streamline your business to make it more efficient.

What six factors would you need to consider in determining the proper channel of distribution? ›

Some of the factors to consider while selecting a channel of distribution are: (1) The Nature of the Product (2) The Nature of the market (3) The Nature of Middlemen (4) The nature and size of the manufacturing unit (5) Government Regulations and Policies and (6) Competition.

What are the 5 conflict management strategies? ›

According to the Thomas-Kilmann Conflict Mode Instrument (TKI), used by human resource (HR) professionals around the world, there are five major styles of conflict management—collaborating, competing, avoiding, accommodating, and compromising.

What are the 4 steps to manage conflict? ›

4 steps To resolve Conflict: CARE
  1. Communicate. Open communication is key in a dispute. ...
  2. Actively Listen. Listen to what the other person has to say, without interrupting. ...
  3. Review Options. Talk over the options, looking for solutions that benefit everyone. ...
  4. End with a Win-Win Solution.
13 Mar 2017

What is channel management and how it can be done effectively? ›

Effective channel management involves four steps: developing your channel strategy, channel development, day-to-day channel management, and channel evaluation. a. Channel Strategy: Understanding the desired customer experience and obtaining a comprehensive view of the channel landscape drives a channel strategy.

What are 7 ways to deal with conflict? ›

Here are seven ways to handle and prevent conflict.
  • Use a structured approach. Taking an impromptu or one-size-fits-all approach won't help resolve most conflict. ...
  • Talk things through. ...
  • Clarify the impact. ...
  • Don't rush to judgment. ...
  • Clarify your expectations. ...
  • Redirect the focus. ...
  • Implement and follow up.
13 Jan 2020

How can conflict be avoided? ›

How to stop conflict before it starts
  1. Know your conflict style. When you have a disagreement with someone, what do you do? ...
  2. Form connections with others. Strengthening your relationships with others can help with preventing conflict. ...
  3. Communicate effectively. ...
  4. Reach out for help.
10 Apr 2019

What are six strategies for resolving conflicts? ›

Let's take a look at the Six-Step Method for Resolving Conflict.
  • Define the problem. ...
  • Come together and communicate. ...
  • Establish relationships. ...
  • Develop an action plan. ...
  • Gain commitment. ...
  • Provide feedback.

What are the five steps of channels management? ›

This channel management process contains five steps.
  • Analyze the Consumer.
  • Establish the Channel Objectives.
  • Specify Distribution Tasks.
  • Evaluate and Select from Channel Alternatives.
  • Evaluating Channel Member Performance.
15 Jan 2016

What is the best channel strategy? ›

Channel Strategy Best Practices
  • Define your business objectives.
  • Define the ideal ROI and KPIs.
  • Segment your portfolio.
  • Understand your channel partner ecosystem.
  • Carefully choose your software.

What is channel management solutions? ›

Channel management (CM) software, also known as partner relationship management software (or just PRM software), tracks goods and services from the seller to the ultimate consumer. These programs are valuable for automating sales and marketing processes through indirect company channels.

Why is there a conflict in distribution channel? ›

Channel conflict occurs when brands interfere with their partners' ability to sell and distribute products to customers. It typically occurs when a brand begins selling its products directly to consumers, disrupting channel partnerships with distributors, retailers, and agents who typically serve as intermediaries.

Why do channel conflicts occur? ›

Channel conflict can occur when multiple partners are selling the same product in a market for different pricing. Inevitably, this will create a situation in which your channel partners have to compete against one another and/or your internal sales team.

How do you improve the efficiency of the channel members? ›

There are three high-level ways to increase channel efficiency: Increasing or carefully picking the channel intermediaries. Increasing the focus on supply chain management. Consolidating all channels into a single, strong channel.

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