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Channel Power, Conflict and Cooperation:

• A channel structure is not only an economic

system but social as well.
• That means it reflects all the characteristics of a
social system:
• Power.
• Cooperation.
• Conflict.
Channel Power defined:

The ability of a channel member to

control and influence the marketing
strategy of an independent channel
member at another level in the
channel.
Examples of Channel Power:

• A manufacturer could use his power to

force a retailer to stock the manufacturer's
full product line when the retailer is
interested only in stocking the best selling
items.
•
A retailer can force a manufacturer to
carry frequent promotions.
Channel power involves dependency:

If B is dependent on A,
then A has a high level of
power over B.
Channel power forms:

• Coercive power.
• Noncoercive power.
Coercive Power:

• Based on the ability of one channel member to

punish another channel.
• Opposite of reward power also called threat
power.
Examples of Coercive Power:

• A manufacturer can threaten to discontinue

selling to a retailer who has a bad customer
service record.
• A franchisor can cancel a franchise, if franchisee
buys from independent sources of supply.
• A powerful retailer may stop displaying a brand
if it is not supported by frequent discounts.
Coercion may backfires:

• The threatened party may take legal action.

• Forms associations to counterbalance other
channel member’s power.
• Threats may help magnify channel conflict.
• Fear, anxiety, and resistance are typical responses
to threats.
Noncoercive Power include:

• Reward power.
• Referent power.
• Expertise power.
• Persuasion power.
• Legitimate power; and
• Information power.
Reward power:

• Channel members who comply are rewarded.

• Called promise power.
• Examples.
Reward may also backfire:

• May prove to be ineffective.

• The reward may be perceived as a bribe.
• May suggest that performance is inadequate.
Referent power:

• Based on the desire of a channel member to

identify with another.
• Reasons may include brands carried, prestige,
image, size, reputation …etc.
Expertise power:

Attributed knowledge due to

long term relationships with
customers, knowledge of
market conditions …etc.
Persuasion power:

Ability of one channel member

to persuade another of the
validity of its position based
on rational appeals.
Legitimate power:

Based on right to exercise

power. Examples include
dealerships and
contractual agreements.
Information power:

Information is power.
Examples access to scanner
data in the retail sector has
empowered retailers.
Methods of manufacturer dominance:

• Having high economic scale.

• High market share.
• High brand loyalty.
• Using franchising.
• Using push money.
• Full-line forcing to sell slow moving merchandise.
• Offering goods in short supply to preferred distributors.
 Methods of wholesaler dominance:

• Having economic scale.

• Using private label strategy.
• Using gray market strategy.
• Developing and maintaining high customer loyalty.
• Tying agreements to sell slow-moving merchandise.
• Using forward and backward vertical integration.
• Offering discounts to retailers.
Methods of Retailer dominance:

• Using store loyalty.

• Increased bargaining power through high market share.
• Using centralized purchasing.
• Using a private label strategy.
• Selling against the brand.
• Using gray market distribution channels.
• Requiring slotting and other fees.
• Developing associations.