Channel power
- 2. Meaning of Channel Power • The Channel Power refers to the ability of any one channel member to alter or modify the behavior of other members in the distribution channel, due to its relatively strong position in the market. • Generally, the manufacturers are seen, dominating the behavior of other channel partners and influencing their actions according to its requirements.
- 3. Types of Channel Power
- 4. • Coercive Power: The manufacturer threatens to terminate the relationship with other channel partners or withdraw the resources deployed with them. With this power, the manufacturer can dominate the others and keep them under his control. But the negative side is, the channel partners may lose their faith in the manufacturer and may enter into inter-conflicts. • Negative reinforcement methods like sanctions, cancellation of exclusive distribution rights Decrease in margins to ensure that all channel members toe the line
- 5. • Reward Power: The manufacturer provides several additional benefits to the intermediaries, with the intention to motivate them to perform certain activities as required. This power is very useful since it brings in the maximum efforts from each channel partner, but this may sometimes be negative as the channel partners may always seek for the benefits in case, they are required to do some other activity. • Example: the channel leader may have the power to grant better promotional allowances or higher margins to channel membrs.
- 6. • Legitimate Power: Here the manufacturer reminds the channel partner to carry out their activities in accordance with the contract they have entered into at the time they became the channel partners. The manufacturer may find it convenient to keep a check on the channel partners in terms of their signed agreement, but the partners may feel humiliated for the continuous reminder for their code of conduct.
- 7. • Expert power: The manufacturer has the expertise that he transfers to the channel partners, and once they acquire it, the power of expertise reduces. Thus, the manufacturer should focus on creating the new expertise, thereby keeping the channel partners updated with the day to day operations. The manufacturer uses this power to retain the interest among the channel partners to work, but the intermediaries may not feel to learn any new things apart from what they have learned. • Example: the manufacturer may have expert knowledge about competitors products, which will be beneficial
- 8. • Referent Power: The manufacturer should develop its image in such a way, that the intermediaries must feel proud to be associated with it. The manufacturer with the influential image can get varied options with regard to the channel partners. But if the manufacturer is weak then intermediaries may not like to get associated with it because that might spoil their market image. • Thus, the manufacturer is the one who provides the goods and services to be sold via intermediaries and, therefore, the channel partners are dependent on the manufacturer for their individual businesses.