Distribution channels are the places and delivery methods businesses use to sell their products and services. Because companies have more than a few ways to get their wares to customers, they sometimes run into conflicts as they sell. Before choosing your distribution methods, review possible conflicts that can arise so you can avoid these channels before you commit money to a particular sales strategy.
Competition With Intermediaries
When a manufacturer or marketers decides to sell product on its website, it creates a conflict with the wholesalers, retailers, distributors, telemarketers, outside sales reps and other intermediaries that are selling its products. It might be so much easier for consumers to shop at the manufacturer’s website that retailers can’t sell enough of the product to make it worth their efforts anymore.
If a manufacturer or marketer allows its intermediaries to compete with each other geographically, that causes a channel conflict. For example, a maker of golf clubs might give a single golf shop or a sporting goods chain in Atlanta an exclusive territory, allowing no other Atlanta retailers to sell the company’s clubs. If the golf club company also allows a retailer to place ads in national golf magazines or to sell the clubs online, that advertiser competes with the retailer in Atlanta.
Some distribution channels cost more to use than others. The more expensive channels can still generate a profit if they increase sales enough. However, when different channels require sellers to raise their prices or allow other sellers to lower their prices, this can cause a conflict among intermediaries. Those who have to sell at a higher price might not be able to compete with those who can sell at the lower price points. In addition, some manufacturers sell at different prices to different intermediaries. Those who buy more get a lower wholesale price from the manufacturer; this causes a pricing conflict between smaller sellers and those who sell greater quantities of a product.
Using different channels can also cause brand confusion. For example, the maker of a shampoo might limit distribution of the product to salons so the company maintains an upscale brand image. Sales reps and wholesalers might agree to represent the product to salons based on this strategy. If the shampoo maker starts selling the product in Wal-Mart and Target, it now confuses and degrades the brand, causing a conflict by sending two different messages about the quality and perceived value of the product.
Not All Conflicts Are Harmful
If you only use one channel to distribute your product or service, you probably won’t reach every potential customer who might buy from you. To make sure you don’t have gaps in your audience coverage, you might need to use enough distribution channels that you end up with some overlap, explains Carl Cullotta of Frank Lynn & Associates, an international channel marketing strategy consulting firm. This can lead to some channel conflict, but overall, your increased coverage provides more benefit than any problems caused by these conflicts.