Managing Channel Power

MANAGING CHANNEL POWER

Power is the ability of one channel member to get another channel member to do something it otherwise would not have done. Power is the potential for influence. Power exist when target firm follows influencer firm.

Power is an emotionally charged term laden with negative connotations such as abuse oppression etc. It could also create great damage. Power represents potential for influence, great benefits can be achieved through its judicious use. Marketing channels should work together for the benefit of end users. When the inefficiency results from two margins rather than one in the channel it is called double marginalisation.

Five Sources of Channel Power

• A product/service whose quality level meets the need of a substantial segment of end user
• At a price the end user considers paying
• Such that it is saleable enough that the terms of trade offered to other channel members enable them to earn minimum acceptable financial returns at the price the end user is willing to pay
• Backed by a minimally acceptable producer reputation
• Delivered reliably such that the producers honours any delays it has negotiated with the channel members or their customers.

A reward is a benefit given in return for a channel members’ agreement to alter its behaviour. In distribution channels they are more focussed on financial rewards. Many channel initiatives create reward power in various forms.

Coercive power stems from ones expectation of punishment by other if it fails to conform with other’s influence attempt. Coercion is synonymous with the potential to threaten another organisation whether implicitly or explicitly.

Expert power is based on the target’s perception that the influencer has special knowledge or expertise that is useful and that the target does not possess.

Legitimate power stems from the target company’s sense that is in some way obligated to comply with the requests of the influencer because such compliance seems right and proper. It is conferred by governments stemming from each nation’s law of contracts and commerce. There are certain norms that exist within the channels such as

• Solidarity

• Role integrity
• Mutuality

Referent power exists when one views other as a standard of reference and therefore wishes to identify publicly with the other. Power plays strategic role as well. The more a channel member invests in being able to provide these five sources the grater will be its utility. Power is a two sided affair specific to each relationship at any given time. Mutually dependent relationships often generate exceptional value added because each side has sufficient leverage to ensure win win solutions. Translating power a latent ability demands communication that is called influence strategies.