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Managing channel conflict is critical to building and sustaining a healthy multi-channel sales organisation. While occasional conflict is unavoidable, too much of it could be a sign that you’ve saturated the market. The situation can get nasty fast.
If left unmanaged, channel conflict will hurt the customer experience, erode profit margins and cause your channel partners to disengage.
Here’s a simple example:
A manufacturer of hair care products had previously only sold their merchandise through a network of retail shops; until the day they launched an online retail store and offered discounts to direct consumers.
Customers who previously bought from the retail stores started buying directly from the brand’s e-commerce store. Which, in fairly short order, eroded the retail customer base. While customers were thrilled to ‘cut out the middleman’. The wholesalers, dealers, sales representatives and retailers were not. And you can understand why.
It’s easier to avoid conflict altogether than to fix it, so it’s useful to consider the different ways it can manifest.
Channel conflict can be classified into four categories, depending on the flow and the parties involved.
Multiple business owners selling the same product often face the dangers of pricing wars. This usually looks like one channel undercutting the price hoping to make it up in additional sales, causing other channels to push their pricing down.
This can lead to confused customers, sales stagnation and loss of value in your product.
The team at The Good says this; ‘every decision should begin with a concern for the customer.’ Because when your customers are happy, your sales increase, creating a streamlined channel.
There is also the risk of ruining relationships with your channel partners, reducing morale along the way.
Unfortunately, when a partner experiences too much conflict or gets badly burnt from ‘deal stealing’, they will likely start to lose motivation to put effort into other deals. Why should they work hard for a deal when another company selling the same products will come and undercut them?
Which is why channel conflict should be avoided.
Here are five ways to adjust your sales strategies to avoid potential channel conflict.
The best way to reduce the possibility of channel conflict is to build strong relationships based on trust, transparency and respect for your brand and customers.
Creating long-term, profitable channel relationships is an on-going process. A channel incentive program can provide a good foundation for the productive communication and positive reinforcement you need to strengthen your network and build harmonious, productive relationships.
Get in touch to find out how a channel incentive program can improve your channel partner relationships and your business.