Manufacturers tend to sell their products through sales channels, which are routes to get the products to the end-customer. Sales channels can include everything from supermarkets and boutiques to the Internet, catalogues and door-to-door selling. As most companies use several channels simultaneously, such as selling in shops and through the Internet, channels sometimes compete with each other to reach the same set of customers. This can result in channel conflict.
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Vertical channel conflict
The sales process is often viewed as a vertical column, with the manufacturer at the top and the consumer at the bottom. The product moves through different levels in the column -- for example, from the manufacturer to a wholesaler, a retailer, and then the customer. Vertical channel conflict occurs between different levels in this column. For example, a manufacturer may decide to sell its products directly to customers via the Internet. It can keep its prices lower but this means that customers are likely to bypass the retailers altogether in favour of the lower Internet prices.
Horizontal channel conflict occurs between organisations operating in the same "layer" of the vertical sales process. For example, a variety of different retailers, from small boutiques to large supermarkets or discount stores could stock the same products. Because they have different models, they tend to be able to discount at different rates.
An example of multilevel channel conflict can be when a product is introduced through a select group of specialist retailers -- such as computer shops which can offer help and advice about using a new technological product. As demand grows, these products start to be sold in supermarkets. Supermarkets offer no specialist services and can therefore offer a lower prices. At the same time, the manufacturer decides to offer the product directly to customers via the Internet at "factory direct" prices.
While some level of channel conflict is inevitable, companies need to manage their sales channels to minimise the effects of conflict. One of the best ways to do this is to build "fences" between competing channels. For example, many companies market different brands to different channel partners, or offer a range of different models that match the needs of different channels.
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