PRICING

INTRODUCTION

• VALUE THAT IS REQUIRED TO PURCHASE A SPECIFIC QUANTITY OF GOOD OR

SERVICE
• CONSIDERATION GIVEN IN EXCHANGE FOR THE TRANSFER OF OWNERSHIP
• INFLUENCES SALES VOLUME AND PROFIT
• DIFFERENT FACTORE ARE TO BE CONSIDERED
• COST OF PRODUCTION , COST OF DISTRIBUTION, COMPETITORS PRICE,
PROFIT, DEMAND, GOVT REGULATIONS, ECONOMIC ENVIRONMENT ETC
• PRICING MEANS THE ACT OF SETTING THE PRICE OF A PRODUCT OR SERVICE
DEFINITIONS

• W J STANTON
• PRICING IS THE FUNCTIONS OF DETERMINING THE PRODUCT VALUE IN
MONETARY TERMS
OBJECTIVES OF PRICING

• WHAT A FIRM WANTS TO ACHIEVE THROUGH PRICING

• PROFIT CENTERED OBJECTIVE – ACHIEVING MAXIMUM PROFIT FOR THE FIRM
• MAX ROI
• SALES CENTERED OBJECTIVE – INCREASING THE VOLUME OF SALES
• MARKET SHARE – SECURE HIGHEST SHARE IN MARKET AND MARKET LEADERSHIP
• MAINTAIN, INCREASE OR DECREASE MARKET SHARE
• MARKET SURVIVAL – LONG TERM EXISTENCE OF FIRMS AND PRODUCTS
• STATUS ORIENTED OBJECTIVE- CURRENT MARKET POSITION, MAINTAIN STABLE PRICE
• COMPETITION – MANAGE COMPETITION
ROLE OF PRICING IN MARKETING STRATEGY

• DETERMINANT OF PTOFIT – HELPS IN ATTAINING TARGETED PROFIT

• OVER PRICED – REFUSE TO BUY , UNDERPRICED – WILL NOT GET DESERVED
PROFIT
• COMPETITIVE WEAPON – FIGHT COMPETITION , PRICE CUTS AND DISCOUNTS TO
BEAT COMPETITORS
• DEMAND CONTROL – INCREASE OR DECREASE DEMAND OF A PRODUCT , PRICE
CUTS TO INCREADE DEMAND AND VICE VERSA
• MODIFICATIONS IN SALES VOLUME - INCREASE OR DECREASE SALES VOLUME
• MARKET SHARE – PERCENTAGE OF TOTAL INDUSTRY SALES A COMPANY HAVE
• ATTAIN DESIRED MARKET SHARE
• PRODUCT POSITIONING – CREATING A UNIQUE IDENTITY OF THE PRODUCT
• PRICE IS AN INPUT TO POSITION THE PRODUCT IN CUSTOMERS MIND
• MARKET STATUS - - ATTAIN DESIRED MARKET STATUS
• PEOPLE PERCEIVE PRODUCT AS HIGH QUALITY OR LOW QUALITY ON THE
BASIS OF PRICE .
FACTORS AFFECTING PRICING DECISION

• ORGANIZATIONSL OBJECTIVES – PRICING DECISIONS DEPEND ON

ORGANIZATIONAL OBJECTIVES EG SUPERIOR QUALITY PRODUCTS – HIGH
PRICED
• PRICING OBJECTIVES – LIKE MAXIMISING RETURNS, INCREASING SALES
VOLUME, BEAT COMPETITORS ETC
• COST OF PRODUCTION – MEET AND RECOVER RAW MATERIAL COST, SELLING
AND DISTTIBUTION COST, OFFICE ADMINISTRATIVE EXPENSES, ADVT COST
ETC
• RULES AND REGULATIONS – SUBJECT TO LAW OF THE LAND
• NATURE OF THE PRODUCT – PRODUCT FEATURES AND ATTRIBUTES ARE
TAKEN INTO ACCOUNT
• MARKET ENVIRONMENT - COMPETITORS PRICE ARE CONSIDERED
• ECONOMIC CONDITIONS – WEAK AND UNEMPLOYED – LOW PRICE
• DISTRIBUTION CHANNEL - COST OF DISTRIBUTION
STEPS IN FORMULATING PRICING /PROCESS OF
PRICING

• UNDERSTANDING ORGANIZATIONAL OBJECTIVES

• CLEARLY UNDERSTAND ORGANIZATIONAL OBJECTIVES
• PRICING DECISIONS MUST BE IN AGREEMENT WITH ORGANIZATIONAL
OBJECTIVES
SELECTING PRICING OBJECTIVES

• WHAT THE FIRM WANTS TO ACHIEVE THROUGH PRICING

• OBJECTIVES- SURVIVAL, PROFIT MAXIMISATION, BETTER MARKET SHARE
ETC
DETERMINING DEMAND

• INVERSE RELATIONSHIP BETWEEN PRICE AND DEMAND

• WHEN PRICE INCREASES , DEMAND DECREASES AND VICE VERSA
• CONDUCT SURVEYS, PRICE EXPECTATION STUDY ETC
• DETERMINE DEMAND AT VARYING PRICE LEVELS
ESTIMATION OF COST

• COST INCURRED FOR PRODUCTION, DISTRIBUTION AND PROMOTION ARE

DETERMINED
• INPUT FOR PRICING DECISION
ANALYZING COMPETITORS PRICE

• NOT ADVISABLE TO SET A PRICE OVER AND ABOVE THE COMPETITORS

• COMPETITORS PRICE AND THEIR PRICING STRATEGIES SHOULD BE
CONSIDERED
CHOOSING A SUITABLE PRICING METHOD

• THERE ARE DIFFERENT METHODS LIKE COST BASED PRICING, DEMAND

BASED PRICING, COMPETITOR BASED PRICING ETC
• METHOD SELECTED MUST FULFIL PRICING OBJECTIVES OF COMPANY
SETTING THE FINAL PRICE

• FINALIZE SELLING PRICE, COMMISSION TO DISTRIBUTORS AND DISCOUNTS

TO BUYERS ETC
EVALUATION OF PRICE

• ANALYZING THE IMPACT OF PRICE SET BY THE FIRM

• IMPACT ON SALES, PROFIT, COMPETITORS , DEMAND ETC ARE ANALYZED
• HELPS TO MODIFY PRICING DECISIONS
POLICIES OR METHODS OR APPROACHES OF
PRICING
• APPROACH FOLLOWED BY THE FIRM TO SET THE PRICES
• TYPES
• COST ORIENTED PRICING POLICY
• DEMAND ORIENTED PRICING POLICY
• COMPETITION ORIENTED PRICING POLICY
• VALUE BASED PRICING
COST ORIENTED PRICING POLICY

• PRICING BASED ON COST OF PRODUCING THE PRODUCT

• PRICE = COST + A DESIRED PROFIT MARGIN
TYPES OF COST ORIENTED PRICING
COST PLUS/MARK UP/ FULL COST PRICING
MARK UP PRICING
TARGET PRICING
BREAK EVEN PRICING
MARGINAL COST PRICING
MERITS OF COST ORIENTED PRICING

• SIMPLEST METHOD
• CAN RECOVER COST AND EARN REASONABLE PROFIT
• EASY TO ADJUST PRICE WHEN COST INCREASES
• USEFUL WHEN UNABLE TO FORECAST DEMAND
• WHEN COMPETITION IS NOT CLEAR
• CAN ENSURE PRICE STABILITY WHEN PRICE DOES NOT CHANGE
DEMERITS

• NO CONSIDERATION ON MARKETABILITY, ONLY FOCUS IS TO RECOVER COST

• NO FOCUS ON COMPETITION
• FLUCTUATION IN COST LEAD TO PRICE FLUCTUATION
• IGNORES DEMAND
• IF COST IS NOT PROPERLY ASCERTAINED, MAY LEAD TO OVER PRICING OR
UNDER PRICING
VALUE BASED PRICING
• NOT ON THE EXACT COST OF DEVELOPING THE PRODUCT
• MARKET RESEARCH AND SURVEYS ARE CONDUCTED TO KNOW ABOUT
CUSTOMER PERCEPTION
• FASHION BRANDS
MERITS

• POSITIVE ATTITUDE AMONG CUSTOMERS TOWARDS THE PRODUCT

• INCREASE SALES VOLUME AND GENERATE MORE PROFIT
• SUCCESSFUL FOR LONG TERM SUCCESS OF FIRMS
• CUSTOMER ORIENTED PRICING POLICY
• GOOD RELATION WITH CUSTOMERS AND CUSTOMER LOYALTY
DEMERITS

• IT IS COSTLY AND TIME CONSUMING

• MORE DATA COLLRCTION AND ANALYSIS REQUIRED
• NO UNITY IN VALUE PERCEPTION OF CUSTOMERS
• NO CONSIDERATION ON COST AND COMPETITION
• DIFFICULT TO MEASURE CUSTOMER PERCEPTION
DIFFERENCE BETWEEN COST BASED PRICING
AND VALUE BASED PRICING
Cost based pricing
Price on the basis of cost factors
Focus on companys situation
The firm prices between
floor(lower) price and
ceiling(highest) price
Price are low compared to value
price
Firm oriented pricing
Easy process
Value based pricing
Ptice on the basis of customer
perception about value of
products
Focus on customer perception
Based on what customers are
willing to pay
Higher price based on quality
perception of customers
Customer oriented pricing
Complex process
DEMAND ORIENTED PRICING POLICY

• PRICING BASED ON LEVEL OF DEMAND OF A PRODUCT

• HIGH DEMAND – HIGH PRICE AND VICE VERSA
• HOTELS AND RESORTS- HIGH PRICE DURING PEAK SEASONS AND LOW PRICE
IN OFF SEASONS
COMPETITION BASED PRICING

• SETS PRICE BY EXAMINING PRICE OF COMPETITORS

• STEPS
• IDENTIFY COMPETING FIRMS AND ITS PRICES
• ASSESS ITS OWN PRODUCTS OR SERVICE
• FIX PRICE – SAME, HIGHER OR LOWER THAN THAT OF COMPETITORS
TYPES OF COMPETITION ORIENTED PRICING
SEALED BID PRICING

• QUOTATIONS ARE INVITED FROM SUPPLIERS AND LOWEST PRICE

QUOTATIONS WILL BE ACCEPTED
• CONSTRUCTIONS, DEALS BY GOVT AGENCIES , B2B TRANSACTIONS ETC
PREDATORY OR DESTROYER PRICING
MERITS OF COMPETITION ORIENTED PRICING

• HELPFUL FOR PRICING OF NEW PRODUCTS

• HELPS TO ATTRACT AND RETAIN CUSTOMERS
• NO COMPLEX CALCULATIONS
• HELPS TO CONTROL COMPETITION THROUGH PRICE ADJUSTMENTS
DEMERITS

• IGNORES COST ELEMENTS

• LOWERING OF PRICE TO DEFEAT COMPETITION MAY RAISE DOUBTS ABOUT
QUALITY AMONG CUSTOMERS
• REDUCE PROFITS DUE TO PRICE CUTS
• PRICE CHANGES WITH THE PREVALENT MARKET PRICE
PRICING STRATEGIES

• SPECIALIZED ACTION PLANS OF PRICING TO ACHIEVE THE TARGETS OF THE

ORGANIZATION
1 NEW PRODUCT PRICING STRATEGIES
A SKIMMING PRICING

• CHARGE HIGH PRICE FOR THE PRODUCT AT INTRODUCTION PHASE AND

THEN MAY LOWER THE PRICE OVER TIME
• SKIM OFF THE CUSTOMERS WHO ARE READY TO PAY HIGHER PRICE TO
ACQUIRE THE PRODUCT
B) PENETRATION PRICING

• CHARGE LOWER PRICE IN ORDER TO GAIN MARKET

• WHEN THE MARKET IS PRICE SENSITIVE
2 PRODUCT LINE PRICING STRATEGIES

• PRODUCT LINE - GROUP OF RELATED PRODUCTS MARKETED BY A COMPANY

• DIFFERENT PRICE FOR DIFFERENT PRODUCTS IN THE PRODUCT LINE
• ALSO KNOWN AS PRICE LINING
A) CAPTIVE PRICING

• CHARGING HIGH PRICE FOR THE SUPPORTING PRODUCTS AND

COMPARITIVELY LOWER PRICE FOR THE MAIN PRODUCTS
• SUPPORTING PRODICTS ARE NECESSARY TO FUNCTION
• LOW PRICE OF MAIN PRODUCT MAY ATTRACT CUSTOMERS
• EG SPARE PARTS AND PERIODIC SERVICES REQUIRED FOR AUTOMOBILES
• KODAK CAMERAS
B) BAIT PRICING

• SETTING VERY LOW PRICE TO ATTRACT CUSTOMERS AND THEN TRYING TO

SELL EXPENSIVE PRODUCTS ONCE CUSTOMERS VISIT THE STORE
3 PSYCHOLOGICAL PRICING STRATEGIES

• TO MAKE PRICE MORE ATTRACTIVE TO CUSTOMERS

• A) CHARM PRICING
• ENDS WITH 9 OR 99
• REDUCED FROM ROUND NUMBER BY ONE RUPPEE
B) ODD PRICING

• SETTING A PRICE ENDING IN ODD NUMBER

C) IMAGE OR PRESTIGE PRICING

• SETTING HIGH PRICE IN ORDER TO CREATE AN IMAGE OF SUPERIOR QUALITY

AND SOCIAL STATUS
D) BUY ONE GET ONE FREE PRICING
BOGOF

• CUSTOMER PAY THE PRICE OF ONE PRODUCT TO GET ANOTHER PRODUCT

FOR FREE
E) COMPARITIVE PRICING

• OFFERING TWO SIMILAR PRODICTS SIMULTANEOUSLY BUT MAKING ONE

PRICE MUCH ATTRACTIVE
4 PROMOTIONAL PRICING STRATEGIES

• REDUCING PRICE OF A PRODUCT OR SERVICE FOR A SHORT PERIOD TO

ATTRACT MORE CUSTOMERS AND INCREASE SALES VOLUME
A) LOSS LEADER PRICING

• AGGRESSIVE PRICING STRATEGY IN WHICH A PRODUCT IS SOLD AT A PRICE

BELOW ITS MARKET COST TO STIMULATE THE SALE OF MORE PROFITABLE
GOODS MARKETED BY THE COMPANY
• LOSS IN THE SALE OF A PRODUCT WILL LEAD TO SUBSEQUENT SALE OF
OTHER PRODUCTS AND BRING PROFIT TO THE FIRM
B)SPECIAL EVENT PRICING

• PROMOTE SALES DURING FESTIVAL SEASONS , OFF SEASONS AND HOLIDAYS

• LOW PRICE IN SUCH OCCASIONS
5 DIFFERENTIAL PRICING STRATEGIES

• NO UNIFORM PRICE FOR THE PRODUCT

• DISCRIMINATORY OR MULTIPLE PRICING
• VARIES WITH CUSTOMERS, TIME OF ORDER, QUANTITY ORDERED, DELIVERY
TIME, PAYMENT TERMS ETC
A)GEOGRAPHICAL PRICING

• DECIDING PRICE ON THE BASIS OF LOCATION OF CUSTOMERS

• COST OF SHIPPING AND TRANSPORTATION ARE CONSIDERED
B)NEGOTIATED PRICING

• FINAL PRICE IS ARRIVED THROUGH NEGOTIATION AND BARGAINING

BETWEEN BUYER AND SELLER
6 PRICE ADJUSTMENT STRATEGIES

• ADJUST PRICE ACCORDING TO MARKETING ENVIRONMENT AND

DIFFERENCES AMONG CUSTOMERS
A)DISCOUNT AND ALLOWANCE PRICING

• ALLOWANCES AND DISCOUNTS TO CUSTOMERS FOR THEIR FAVOURABLE

RESPONSES
• QUANTITY DISCOUNTS
• PRICE DISCOUNTS
B) DYNAMIC PRICING

• PRICE IS NOT CONSTANT OR FIXED

• CHANGES WITH INCREASE IN DEMAND AT CERTAIN TIMES , TYPE OF
CUSTOMERS OR MARKETING CONDITIONS
• AIRLINE COMPANIES
7 SOME OTHER PRICING STRATEGIES

• A) PREMIUM PRICING
• HIGH PRICE FOR A PRODUCT CLAIMING THAT THE PRODUCT IS UNIQUE
• WOODLAND SHOES, RAYMOND , PARK AVENUE ETC
B) ECONOMY PRICING

• KEEP THE PRICE AT THE LOWEST POSSIBLE LEVEL

• MARKETING AND PRODUCTION COST ARE MINIMIZED TO OFFER LOWER
PRICE FOR CUSTOMERS
C) ADMINISTERED PRICING

• FIXED BY A LEGAL STATUTE OR BY A REGULATORY BODY FORMED BY GOVT

• FOR EG GOVT FIXES THE PRICE FOR ITEMS DISTRIBUTED THROUGH PUBLIC
DISTRIBUTION SYSTEM
D) BUNDLE PRICING

• A FIRM SELLS A BUNDLE OR SET OF PRODUCTS AT A LOWER PRICE THAN IT

WOULD CHARGE IF THE PRODUCTS WERE SOLD SEPERATELY
• NEED TO PAY MORE IF THESE PRODUCTS ARE PURCHASED SRPERATELY
E) REFERENCE PRICING

• FIRM SETS THE PRICE JUST BELOW THE COMPETITORS PRICE

• COMPETITORS PRICE IS THE REFERENCE PRICE FOR THE CUSTOMERS
• ATTRACT PRICE SENSITIVE CUSTOMERS
F) SEGMENTED PRICING

• SET MORE THAN ONE PRICE FOR THE SAME PRODUCT IN DIFFERENT MARKET
SEGMENTS
• DIFFERENT PRICE FOR DIFFERENT SEGMENTS
PRICING POLICIES AND PRICING STRATEGIES
Pricing policies
Describes the way in which a
firm fixes price for its products
Primary goal- suitable price
Emphasis on Cost, demand,
competition etc
Formulated on the basis of
detailed analysis of crucial
factors influencing price
Shows the idea of the firm on the
market situation and its ability to
take risk
Pricing Strategies
Specialized action plans to
achieve the market targets set by
the company
Focus on multiple goals such as
survival, beating competition,
profit maximization, increased
sales etc
Considers economic conditions,
competitors performance,
consumer behaviour etc
Uses pricing policies to
determine the best ways to attain
the pricing goals of company
More complex than pricing
policies
DUOPOLY
MARKET STRUCTURE AND PRICE

• PERFECT COMPETITION – DETERMINED BY DEMAND AND SUPPLY

CONDITIONS
• MONOPOLY – FIRM IS THE PRICE MAKER
• IMPERFECT MARKET – FIRM CAN EXERCISE CONTROL OVER PRICE TO A
CERTAIN EXTENT
DEFINITION

• STANTON
• A DISTRIBUTION CHANNEL CONSISTS OF THE SET OF PEOPLE AND FIRMS
INVOLVED IN THE TRANSFER OF TITLE OF A PRODUCT AS THE PRODUCT
MOVES FROM PRODUCER TO ULTIMATE CONSUMER OR BUSINESS USER
IMPORTANCE

• CREATE PLACE AND TIME UTILITIES

• EXECUTE PHYSICAL FLOW OF GOODS FROM PRODUCER TO CONSUMER
• BUILDS MORE CUSTOMERS FOR THE PRODUCT
• CREATION OF MARKET FOR NEW PRODUCT
• DELIVERING GOODS AS AND WHEN NEEDED BY THE CONSUMERS
BASIC CHANNELS OF DISTRIBUTION OR TYPES OF
CHANNELS

6
SNAPSHOT OF TYPE OF CHANNELS
FUNCTIONS

• LINK BETWEEN PRODUCTION AND CONSUMPTION

• IDENTIFYING AND CONTACTING BUYERS FOR MAKING SALES
• MAKING DELIVERY AS PER THE REQUIREMENTS OF THE CUSTOMER
• ENCOURAGING AND INFLUENCING PROSPECTIVE BUYERS TO PURCHASE THE
PRODUCT
• PROVIDING MARKET RELATED INFORMATION TO THE PRODUCERS
• MANAGING THE OVERALL PROCESS OF DISTRIBUTION
• DEVELOPMENT AND CREATION OF MARKET FOR NEW PRODUCTS
• EXTENDING PRE SALES AND AFTER SALES SERVICE TO CUSTOMERS
• EDUCATING CUSTOMERS ABOUT THE USAGE OF THE PRODUCT
• GIVING CREDIT FACILITIES TO RETAILERS AND CONSUMERS
• ACCEPTING RISKS ASSOCIATED WITH STORAGE HANDLING AND
TRANSPORTATION OF PRODUCTS AND SERVICES
DISTRIBUTION CHANNEL STRATEGY

• METHOD THAT CONTROL THE FLOW OF GOODS FROM MANUFACTURER TO

THE CONSUMER
• 3 FACTORS
• DISTRIBUYION INTENSITY
• CHANNEL CONFIGURATION
• CHANNEL ARRANGEMENT
DISTRIBUTION INTENSITY

• LEVEL OF AVAILABILITY OF PRODUCT AND ITS MARKET COVERAGE

• 3 VARIANTS
• INTENSIVE DISTRIBUTION – MAXIMUM POSSIBLE COVERAGE FOR THE
PRODUCTS AND SERVICES BY SUPPLYING IN ALL RETAIL OUTLETS
• CHOCOLATES, PENS ETC
• SELECTIVE DISTRIBUTION – SUPPLIES PRODUCTS IN A LIMITED NUMBER OF
OUTLETS IN THE TARGET MARKET
• SELECT BEST PERFORMING OUTLETS
• LOUIS PHILIPPE, VAN HEUSEN ETC
• EXCLUSIVE DISTRIBUTION – ONLY ONE WHOLESALER, OR RETAILER OR
DISTRIBUTOR IS APPOINTED IN A SPECIFIC AREA
2 CHANNEL CONFIGURATION

• DESIGN OF THE DISTRIBUTION CHANNEL

• NUMBER OR LEVELS OF INTERMEDIARIES WITHIN A CHANNEL SUCH AS
AGENTS DISTRIBUTORS, WHOLESALERS, RETAILERS
• DESIGN, COMPOSITION AND SIZE OF THE CHANNEL
• LENGTH MAY BE SHORT, MEDIUM OR LONG
3 CHANNEL ARRANGEMENT

• RELATIONSHIP AND PARTNERSHIP BETWEEN THE INTERMEDIARIES

• MUTUAL TRUST AND UNDERSTANDING IS IMPORTANT FOR EFFICIENCY
• TYPES
• INDEPENDENT CHANNEL ARRANGEMENT
• DEPENDENT CHANNEL ARRANGEMENT
• A) VERTICAL MARKETING SYSTEM (VMS)
• B) HORIZONTAL MARKETING SYSTEM(HMS)
INDEPENDENT CHANNEL ARRANGEMENT

• EACH MEMBERS FOCUS ON THEIR OWN OBJECTIVES

• FUNCTIONS INDEPENDENTLY
• NO UNITY
• NOT CONCERNED ABOUT CHAIN AS A WHOLE
• FREE TO TAKE THEIR OWN DECISIONS
DEPENDENT ARRANGEMENT
VMS

• MEMBERS FEEL UNITED AND WORKING TOGETHER

• CLOSE CONTACT WITH EACH OTHER
• VMS
• INTERMEDIARIES AT DIFFERENT LEVELS WORK TOGETHER
• RESOURCES LIKE INFORMATION, EQUIPMENT AND EXPERTISE ARE SHARED
• USUALLY MANAGED BY A DOMINANT PLAYER- CHANNEL CAPTAIN
HORIZONTAL MARKETING SYSTEM
HMS

• WHEN ORGANIZATIONS OPERATING AT SAME LEVEL OF THE CHANNEL

COOPERATE AND WORK TOGETHER
• SHARE RESOURCE AND EXPERTISE
• EG TWO SUPPLIERS
• TWO RETAILERS
FACTORS AFFECTING CHOICE OF CHANNEL OF
DISTRIBUTION

• FACTORS CAN BE BROADLY DIVIDED INTO 5 HEADS

• PRODUCT FACTORS
• MARKET FACTORS
• COMPANY FACTORS
• MIDDLEMEN FACTORS
• ENVIRONMENT FACTORS
• NEW PRODUCTS
• ARE USUALLY DISTRIBUTED THROUGH SHORT AND DIRECT CHANNELS
• BUYER OF THE PRODUCT
• IF BUYER WANTS DIRECT DEALINGS WITH THE COMPANY – THEN DIRECT
DISTRIBUTION
• SIZE OF THE COMPANY
• LARGE COMPANY WITH WIDE RANGE OF PRODUCTS – OWN SYSTEM OF
DISTRIBUTION

• POLICY OF DISTRIBUTION
• COMPANY POLICY REGARDING SPEED, SAFETY AND EFFICIENCY ARE MAJOR
FACTORS AFFECTING DISTRIBUTION CHANNEL
MIDDLEMEN FACTORS
CHANNEL CONFLICT

• WHEN INTERMEDIARIES OR MIDDLEMEN COMPETE WITH EACH OTHER BY

BREAKING THE MUTUALLY AGREED CHANNEL ROUTE FOR SELLING THE
PRODUCT
• KNOWN AS DISINTERMEDIATION
• DAMAGE RELATIONSHIPS
TYPES OF CONFLICTS

• VERTICAL CHANNEL CONFLICTS – BETWEEN MEMBERS IN HIGHER AND

LOWER LEVELS EG MANUFACTURER AND WHOLESALER
• HORIZONTAL CHANNEL CONFLICTS – BETWEEN MEMBERS IN SAME LEVEL
EG BETWEEN 2 RETAILERS

• MULTI CHANNEL CONFLICTS – BETWEEN TWO OR MORE CHANNELS

ESTABLISHED BY A MANUFACTURER
CONFLICT RESOLUTION STRATEGIES OR
CONFLICT MANAGEMENT

• COMMUNICATION – REGULAR COMMUNICATION WITH MEMBERS TO

UNDERSTAND PROBLEMS AND SETTLE COMPLAINTS
• DEALER COUNCILS – A COMMITTEE OR BODY OF CHANNEL MEMBERS ARE
FORMED FOR DISCUSSING AND RESOLVING CONFLICTS
• PRIORITIZING CUSTOMER SATISFACTION – CONVINCING MEMBERS THAT
CUSTOMER SATISFACTION IS IMPORTANT THAN PERSONAL INTERESTS
• ARBITRATION AND MEDIATION – THIRD PARTY TO SETTLE THE CONFLICT.
SOMETIMES COURT OR GOVT DEPARTMENTS TAKE PART IN THE
ARBITRATION PROCESS