Vertical and horizontal channel conflict are the primary ways partner programs fall flat on their face when left untreated. Preventing them from happening is key to healthy partner relations.
Although many organizations think of this as something to consider "down the line," it's not, and the reason is that a well-designed partner program should have minimal to no conflict.
That design component starts from the very beginning and includes thinking about preventing both vertical and horizontal channel conflict as a key component of the program itself.
- 1. How Horizontal & Vertical Channel Conflicts Happen
- 1.1. Horizontal Channel Conflict: Causes & Examples
- 1.1.1. What Causes Horizontal Conflict?
- 1.1.2. Example of Horizontal Channel Conflict
- 1.2. Vertical Channel Conflict: Causes & Examples
- 1.2.1. What Causes Vertical Channel Conflict?
- 1.2.2. Example of Vertical Conflict
- 2. How To Prevent (or Resolve) Channel Conflict
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The differences between horizontal vs vertical channel conflict come down to where the issues take place within the distribution network (i.e. the "channel").
Horizontal channel conflict is centered around partners of the same level. This tends to focus on competition over leads and customers, overlapping sales networks, and channel saturation.
When it comes to avoiding potential conflict over leads, deal registration is key.
The practice allows you as a business to keep your partners not only engaged in the process of recording leads accurately but also preventing anyone else from working on those same leads.
That includes your own internal sales team.
For example, if a partner wants to upsell/cross-sell a lead they've found with your software product, they should be able to do so without your internal salesforce interfering.
The acquisition value of that lead is entirely attributable to the partner, not to your internal sales efforts.
Providing partners with a first-registered, first-served basis is the fairest way to handle deal registration, providing your partners with enough time (anywhere from 30 to 180 days usually) to close the deal and reap the rewards or discount for the deal they registered.
Vertical channel conflict takes place between two or more partner types conflicting across multiple channels. This could be a disagreement between provider and reseller, a customer acquisition conflict between a primary business and an affiliate, and other parallels.
You can think of vertical conflict as 2 partners working in parallel:
An affiliate (blogger, influencer, etc.)
A reseller (VAR, MSP, etc.)
When the affiliate uses their influence to manipulate an audience's understanding of the product at scale, a conflict can arise between reseller and affiliate due to the wide coverage the latter has compared to the former.
This is why it's so important to design your partner program in a way where partners don't compromise the positioning of your product and/or step on each other's toes.
The best way to do so is with a clear for each partner. This will help you enable your partners, share up-to-date materials, and streamline your sales process.
Horizontal channel conflict happens when issues arise between two partners at the same level of distribution. When designed correctly, a partner program can include some level of horizontal channel competition to ensure partners are incentivized to do their best.
However, you'll want to avoid downright conflict. Too much competition, or reseller partners that aren’t playing fair by undercutting other resellers can quickly turn the relationship sour.
That’s why it’s important toclosely manage horizontal channels.
There are several causes of horizontal conflict:
Lead & deal conflicts - fighting over the same customers or sales opportunities
Distrusting partners - not respecting the rules of the program
Competition overpricing - undercutting other resellers by offering lower prices than agreed upon with the developer of the program
Multiple product conflict - offering different products or variations
Depending on your business structure, you want to brainstorm with your leadership team and consider which of these are most likely to happen.
Then, design the program around these issues so that partners withinspecific channels don't end up fighting each other.
A common example of horizontal channel conflict is a lead being in discussion with two resellers at the same time.
This leads to an obvious conflict as the lead can only go with one or the other, making it impossible for one of the two partners to get their worth out of the deal.
Vertical channel conflict is the most common type businesses tend to run into. It happens when issues arise between two partner types operating in different channels.
Because multiple channels are involved, it can be a challenge to maintain a fair and competitive environment, especially when incentives are at play.
Some of the causes of vertical channel conflict are:
Unfair advantages offered to a partner type compared to another
Lucrative incentives that may not apply to everyone
Disputes overpricing across channels
All of these conflicts can also happen with the Direct Sales Team
Maintaining a balance to avoid vertical channel conflict is all about coming up with incentives that are fair for the amount of work necessary to register a lead.
An affiliate lead is not nearly worth as much as a reseller lead due to the personal nurturing that happens with the latter. This needs to be reflected ineach reward program.
A reseller with a small and personalized business network A wants to nurture potential leads personally to achieve high-quality results and guarantee themselves long-lasting income through lifetime % commissions on recurring revenue from a software provider.
On the other hand, an affiliate with an indirect and large-scale business network B aggressively targets a large portion of the market - indirectly targeting many of the prospects in network A.
The reseller learns about this during their nurturing sessions or via personal research.
Although the affiliate only benefits from targeting a large number of prospects, this puts the reseller in a position of conflict with how the deal is being presented to that specific prospect. In this case, the software provider must limit the affiliate's targeting to a specific segment of their audience rather than the entire business network B.
This can also be done via a business plan.
Preventing channel conflict can be as simple as allowing partners to “secure” leads & deals through a registration service. But the majority of channel conflicts—horizontal and vertical—can be avoided by ensuring that a fair, competitive partner environment exists.
Showing favoritism towards a certain partner can ruffle some feathers and give people the wrong impression.
The best way to prevent and resolve channel conflict is by building trust and providing a fair environment for all of your partners. Using a platform or service that allows visibility and clear management can go a long way in establishing trusting relationships.
A Partner Relationship Management (PRM) tool like Kiflo is effective for this. It provides a fair playing field for all partners involved and showcases clear ownership of leads and deals. It also provides a feature to detect channel conflict.
The goal is to help the Channel Partner Manager not accept a lead or deal if a conflict exists with another partner or the direct sales team.
Partners can sell with confidence knowing that their hard work is secure and protected. It also gives you the power to accept and acknowledge deals as they happen.
Want to try it for your own partner program?
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Frequently Asked Questions (FAQ)
What are two types of channel conflict?
Horizontal and vertical channel conflict.
What is horizontal channel conflict?
Horizontal channel conflict happens when issues arise between two partners at the same level of distribution. This conflict tends to focus on competition overlapping sales networks, and channel saturation.
What is vertical channel conflict?
Vertical channel conflict happens between two or more partner types conflicting across multiple channels. As multiple channels are involved, it can be a challenge to maintain a fair and competitive environment, especially when incentives are at play. This conflict is the most common one businesses tend to run into.
What is the difference between vertical and horizontal channel conflict?
The main difference between both types of conflict is that horizontal channel conflict happens between two partners at the same level of distribution whereas vertical channel conflict happens between two or more partner types conflicting across multiple channels.