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Chapters 6 & 7: Behavioral Processes in Marketing Channels. Major Topics. Challenges of Managing Channels Marketing Channels as a Social System - A Conceptual Framework Major Building Blocks of the Framework* Economic Structure Economic Process Political Structure Political Process.

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major topics
Major Topics

Challenges of Managing Channels

Marketing Channels as a Social System

- A Conceptual Framework

Major Building Blocks of the Framework*

  • Economic Structure
  • Economic Process
  • Political Structure
  • Political Process
challenges in exercising power and achieving control in marketing channels
Challenges in exercising power and achieving control in marketing channels
  • Loose alignment between channel members
  • Central direction is lacking
  • Single ownership is often missing: intensity
  • Formal authority is absent
  • Reward and penalty system is not precise
  • Central planning is rare.
marketing channel as social system
Marketing Channel as Social System

4

Social System

• Generated by any process of

interaction on sociocultural level

• Between two or more actors

• Actor is individual or collectivity

=

Interorganizational

Social

System

Individuals or collectivities

Interacting within marketing channel

our conceptual framework political economy framework
Our Conceptual Framework:Political Economy Framework

Four Elements ofPolitical Economy Framework*

1. Economic Structure

2. Economic Process

3. Political Structure

4. Political Process

1 economic structure
1. Economic Structure

- What We Learned = Channel Structure

  • Ex1) Vertical Marketing System
  • Ex2) Market-Clan-Hierarchy Trichotomy
  • Roles and Expectations
roles in marketing channels
Roles in Marketing Channels

A set of prescriptions defining what the behavior

of a position member should be

  • • Roles change over time.
  • • Straying far from a role may cause conflict.
  • • Roles help describe & compare the expected
  • behavior of channel members and provides insight
  • into the constraints under which they operate.
  • Role Stress: Role Ambiguity and Role Conflict
roles in marketing channels8
Roles in Marketing Channels

Questions to help the channel manager

  • What role does the channel manager expect a particular channel member to play in the channel?
  • What role is this member expected to play by his or her peers?
  • Do the manager’s expectations for this member conflict with those of the member’s peers?
  • What role does this member expect the manager to play?
2 economic process
2. Economic Process

- Three Dimensions of Decision Making

1) Formalization

2) Centralization

3) Participation

  • Three Elements of Economic Exchange

1) Resource Exchange

2) Information Sharing

3) Collaboration

3 political structure
3. Political Structure

- Power-Dependence between Firms*

1) Motivational Investment in the Partner

2) Replaceability of the Partner

- Strength of Ties

1) Intensity: Past Resource Commitment

2) Intimacy: Information Disclosure

3) Reciprocity: Mutually Agreed Conditions

power in the marketing channel
Power in the Marketing Channel

4

The ability of a particular channel

member to control or influence the

behavior of another channel member

Keys to understanding Power:

• Power Bases

• Use of Power Bases

cf) Control

bases of power for channel control
Bases of Power for Channel Control*

Reward Power

Coercive Power

Legitimate Power

Referent Power

Expert Power

using power in the marketing channel
Using Power in the Marketing Channel

1. Identify available power bases

Bases are a function of size of:

• producer or manufacturer

• organization of channel

• particular set of circumstances

2. Select and use appropriate

power bases to better or

worsen channel relationships

slide14

FIGURE 8.1: THE NATURE AND SOURCES OF

CHANNEL POWER

A’s Level of Investment in:

Coercion

Reward

Legitimacy

Expertise

Reference

DEPENDENCE

OF B ON A

U T I L I T Y

A’s Offering to B:

Coercion Reward

Legitimacy Expertise

Reference

Competitive Levels of:

Coercion

Reward

Legitimacy

Expertise

Reference

POWER OF

A OVER B

S C A R C I T Y

slide15
Countermeasures for balancing

power asymmetry*

      • Develop alternative sources
      • Organize a coalition with other firms
      • Walk out of the relationship!
      • Raise the other party’s dependence on you

©McGraw-Hill Companies, Inc. 2002

4 political process
4. Political Process

- Communication & Use of Power

  • Control = Achieved Influence
  • Conflict
interfirm communication
Interfirm Communication

- Four Dimensions of Communication

1) Content*

2) Frequency

3) Modality

4) Directionality

- Influence Strategies**

behavioral process in marketing channels iv using power to exert influence
Influence Strategy

Promise

Threat

Legalistic

Request

Information exchange

Recommendation

Power Bases

Reward

Coercion

Legitimacy

Referent, Reward

Expertise, Reward

Expertise, Reward

Behavioral Process in Marketing Channels IV:Using Power to Exert Influence

©McGraw-Hill Companies, Inc. 2002

communication processes
Communication Processes

Behavioral Problems in

Channel Communications

1.

Differences in goals

between

manufacturers &

their retailers

2.

Differences in

the kinds of

language they use

to convey

information

communication processes cont d
Communication Processes (cont’d)

Behavioral Problems in

Channel Communications

3.

Perceptual

differences

among

members

4.

Secretive

behavior

5.

Inadequate

frequency

of

communication

slide21
Major Sources of Channel Conflict*
    • Competing Goals
    • Different Perceptions of Reality
    • Clashes over Domains: Intrachannel competition
    • Multiple channels and Gray market
    • Threats by Channel Partner

©McGraw-Hill Companies, Inc. 2002

figure 7 2 natural sources of conflict inherent diffrences in viewpoints of suppliers and resellers
FIGURE 7-2: NATURAL SOURCES OF CONFLICT: INHERENT DIFFRENCES IN VIEWPOINTS OF SUPPLIERSAND RESELLERS
managing channel conflict
Managing Channel Conflict

Detecting

conflict

Managing

Conflict

Appraising the

effect of

conflict

Resolving

conflict

slide24
Conflict Resolution Strategies

1. Information-intensive mechanisms: DAC, Personnel exchange

2. Third-party mechanisms: mediation and arbitration

3. Building Relational norms: flexibility, solidarity

©McGraw-Hill Companies, Inc. 2002

slide25

High Cooperativeness

Accommodation

Cooperativeness: concern for the other party’s outcomes

Collaboration

or

Problem solving

Compromise

Low Assertiveness

High Assertiveness

Avoidance

Competition

or

Aggression

Assertiveness: Concern for one’s own outcomes

Low Cooperativeness

Based on Thomas (1976)

CONFLICT RESOLUTION STYLES

slide26
Key Qualitative Outcomes
    • Trust
    • Satisfaction
    • Commitment

©McGraw-Hill Companies, Inc. 2002

slide27

FIGURE 9.1: HOW HIGH LEVELS OF CONFLICT ERODE CHANNEL RELATIONSHIPS

_

CONFLICT

Level of tension, frustration, disagreement in relationship experienced by focal firm

ECONOMIC SATISFACTIONof focal firm: positive affective response to financialrewards derived from relationship or economic gratification

_

_

TRUSTFocal Firm’s belief in counterpart’s honesty and benevolence

_

NON-ECONOMIC SATISFACTIONof focal firm: positive affective response to psycho-social aspects of relationship, or gratification from non-financial sector

+

COMMITMENTFocal Firm’s desire to continue relationship and to sacrifice

to build and maintain it

Based on Geyskens, Steenkamp, and Kumar (1999)