What is channel conflict?
There are many different types of conflict that can arise in our lives at any time. It is important that we deal with any conflict that arises accordingly to ensure there are no further problems and to decrease escalation. Channel conflict is a form of conflict that arises “when the behaviour of a channel member is in opposition, to its channel counterpart. It is opponent centred and direct, in which the goal or object sought is controlled by the counterpart.” (Coughlan, Anderson, Stern, Adol, p. 238.) Basically when stakeholders within the same business are competing with each other for the best results for themselves, not the overall business outcome.
The following questions are answered in regards to the case study presented. The case study can be found at http://mylams.com/ebusiness/topics-7-12/topic-9-channel-conflict/.
1) Insurance companies are facing a current struggle with the evolution of online businesses. It is becoming easier and more cost efficient to sell the same insurance over the phone or online. Whilst for the business, they are generating the same, if not more profit with less of a work load, it is putting their insurance brokers out of work, they are not getting commission or achieving their sales targets due to the ease in which customers can access the same service via the internet or mobile phones. The first thing that the insurance company must look at is how they can keep their brokers happy and involved in the sale. They must meet with the brokers, and with stakeholders and discuss potential outcomes with using direct sales, and what the future of the business looks like. There is no doubt this will be a hard and time consuming task but in order to keep all parties happy and on the same page, it needs to be done. They may need to look at reducing the number of brokers and investing more into call centres – whatever is going to be more successful for the business.
Once completed, they may look at alternatives in how to keep brokers involved, and to keep their relationships as strong as possible. An example of this may be brokers still doing their same job and getting out and about, but rather than looking to get people to buy products, they may just go out and ensure they are happy, and that they quality of the product is to the highest standard and is suitable for what is required.
2) Another example of channel conflict is a retail outlet offering lower prices compared to a major clothing company. The retail outlet sell their clothes at a lower percentage mark up, meaning they make less profit however the force bigger retail companies also to lower their prices in order to remain competitive and not lose business. This is known as a ‘loss leader.’