Every business needs a well-structured plan to distribute and market its products or services. But not every business pays attention to this or is well invested in it, which results in a channel conflict.
A channel conflict is a situation when two or more partners or colleagues within the sales team working on the same lead or deal experience discord, differences, or dispute. As a result, one partner's activity affects the business, profitability, sales, and market share of the other partner.
While there are several causes of channel conflict, business owners need to handle it smartly to mitigate its effects on their businesses. In this article, we will look into five common causes of channel conflict in the indirect sales ecosystem.
- 1. 5 Causes of Channel Conflict
- 1.1. Incompatible Goals with Your Partners
- 1.2. Lack of Communication Between Partners
- 1.3. Unclear Policies & Contract
- 1.4. Marketing and Strategy Differences
- 1.5. Resistance and Fear of Change
- 2. How to Overcome Channel Conflict?
- 3. How to Prevent Channel Conflict?
- 4. Conclusion
Table of contents
So, what are the causes of channel conflict? Below, we explain the causes of channel conflict to help business owners improve.
The moment you no longer share the same goals with your partners is the moment there is bound to be a channel conflict. Imagine if each dog in a dog sled team pulled in different directions—they likely wouldn't go anywhere at all. The same is true of partner programs.
This problem often occurs because the strategy one partner may engage in may be different from that of another partner. While incompatible goals are one of the most common causes of conflict amongst organizational partners, it is also one of the easiest to resolve.
When partners in an organization do not have the same goals, they orient their work in different directions.
For example, a reseller partner may want to increase the price of the product to bring more revenue. But on the other hand, you, as a business owner may want to focus more on an affordable and fair price with repetitive purchases. While both goals are beneficial to the software, the mode of execution clashes.
Lack of effective communication between partners is one of the main causes of conflict. When there is no proper communication, partners go about trying to achieve their own goals the best way they can with the little information they have.
Because partners don't know about the plans of other partners due to a lack of effective communication, it sometimes causes conflict. Poor communication between partners will only deter them from achieving a set goal.
For partners to collaborate towards moving an organization forward, they need to keep all communication channels open.
With improper intercommunication, partners are not able to foster a good working relationship. This also brings down their morale, which in turn affects their effectiveness and productivity.
If in an organization there is a change in a marketing strategy with no proper distribution of the information, it will cause disparity and obstruct the process. For a marketing strategy to be effective, everyone in charge of one aspect or the other needs to be fully involved.
Unclear or ill-defined policies and contracts in an organization cause partners to have conflict. Irrespective of the field of the partner—be it operations, supervision, management, or administration—clear and defined roles and responsibilities need to be in place.
Unclear policies and contracts cause structural conflict and illicit practices between partners. And when partners are not on the same page, it jeopardizes the progress of other partners. This will affect the organizational progress, as well as business outcomes.
Unclear policies and contracts can impair the progression of organizational strategies, limit mutual collaboration between partners, and render partners deviated from results.
Additionally, unclear policies and contracts in an organization can cause duplication of effort by partners. Business owners are advised to pay strict attention to defining the policies and contracts of their partners to save time and resources.
By doing this, each partner will have a clear vision of where, how, and why their services are needed in the organization.
As a savvy business owner, you should know that marketing and strategy differences in an organization are common. Strategic or marketing misalignment between partners often arises due to poor communication, which could negatively affect sales.
Imagine one partner pitching a product as an exclusive up-market product while another partner trying to pitch it as an all-purpose mainstream solution. This could cause a lot of tension and conflict.
If marketing and strategy conflicts are not managed properly and promptly, partners will end up wasting precious time in their cubes or offices rehashing the conflict and placing blame rather than focusing on core goals like increasing sales.
Moreover, conflicting members are less focused on the project at hand, hence reducing productivity. Overall, strategic or marketing misalignment causes the organization to lose customers, access to essential resources, money, and so on.
Leadership is important in any organization. However, there may be a conflict between the leader and partners. Conflict between the leader and partners often arises when the leader wants to make some changes, but the intermediaries are unwelcoming to these changes.
Resistance to leadership and change raises friction in the organization. The bottom line is that change is good, as is often a sign of growth and improvement.
As a good leader, it is important to sell any change you want to affect to your partners first so that they can effectively sell it. But when leaders are merely trying to impose changes on partners, it can lead to resistance, which in turn will lead to a soured relationship.
First, you need to accept that conflict is natural and can happen in a working environment. In fact, positive conflict can be great for creativity and building strong partner relationships. However, regardless of what the conflict is about, as a business owner, you should understand that your response can decrease or escalate it.
Conflict often arises when there is no clear policy on how a certain situation should be handled.
Another tactic that has helped several businesses overcome conflicts is by organizing regular meetings with partners to discuss marketing goals and modes of execution that help everyone remain aligned.
As a business owner, you should acknowledge that each team may have its marketing and strategic ideas. Nevertheless, it is your role as a business owner to decide which idea will best help the business grow.
When it comes to overcoming or preventing channel conflict between partners, effective communication is the key. Communication helps every department of the organization to seamlessly interact, preventing the occurrence of a conflict.
Conflict can arise from several areas, which it is important to have a policy in place that helps keep everyone in-check.
For example, you shouldn't wait until lead generation conflict arises before utilizing the lead generation strategy, which includes tracking the source and quality of your leads.
Similarly, you should have an established policy of what each partner is supposed to do to avoid role ambiguity. Overall, it depends on the nature and operations of your business.
However, the best way to prevent channel conflict, regardless of your business type, is to anticipate areas where it may arise and have policies that will guide partners in such scenarios.
This article talks about the most common causes of channel conflict and how to remedy them. These five points can help business owners like yourself prevent channel conflict and strengthen partner relationships. But the truth is, sometimes these tactics are not enough. You will likely need partnership software, extra support, or both.
If you can't manage partners' relationships yourself, you can look up to Kiflo for assistance. Kiflo is a PRM software that helps small-to-medium businesses drive sales growth through partnerships. Kiflo includes powerful PRM features that will help to prevent channel conflict, help partners share up-to-date materials, and streamline the sales process.
Frequently Asked Questions (FAQ)
What is the effect of channel conflict?
Channel conflict may cause sales deterioration in an organization. Sales volume will go down because partners wouldn’t be at their optimal performance, hence leaving customers unsatisfied. And dissatisfied customers do not advertise your products and brand let alone praise it; instead, you lose them to your competitors in the market.
What are the types of channel conflict?
There are four main types of channel conflicts: inter-types channel conflict, multi-channel level conflict, horizontal level conflict, and vertical level conflict. Inter-type channel conflict arises when the large retailer sells the same product line as the small retailer to challenge them. Similarly, multi-channel level conflict arises when a manufacturer sells its product with multiple channels, and the partners involved encounter issues. Horizontal level conflict occurs between partners on the same level. Lastly, vertical level conflict occurs between partners on different levels.
Why are there conflicts in channels and how are these conflicts managed?
Conflicts are results of disagreement in any organization. They cannot be avoided, but can be managed. This is because everyone is entitled to their opinion and difference in ideas, or the way they'd prefer to do things. As such, business owners need to align the superior goal of the organization with the individual goals. Regular communication through feedback and formal or informal meetings also helps channel leaders and partners get along in an organization.
What are the strategies to manage channel conflict?
To effectively manage channel conflict, first it is important to understand the root of the conflict. If the conflict is about price, then adjust your pricing structure. Second, segments and territory can also cause conflicts. But by establishing assigned segments and territories to partners, you can easily overcome this. You can also utilize a lead registration system to overcome conflicts about lead generation strategy.