CHAPTER 6

CHANNEL POWER:
Getting It, Using It, Keeping It

Power
Power is the ability of one channel member (A)
to do something it otherwise would not have
done.
Power is the potential for influence
Power and cooperation
Power is a tool

Why marketing channels require

Power
To avoid cost and garner revenue
What is best for system may not be best for
each member
Malevolent vs. Benevolent

Power as Mirror Image of

Dependence
Specifying dependence
Utility
Availability of alternate sources
Utility x scarcity of alternative sources

Power as Mirror Image of

Dependence
Measuring dependence directly
Utility can be measured by:
Benefits offered
Understanding of channel partner goals
Perception of value

Inventorying bases of power

Ease of replacement
Potential competition
Existing competition
Switching cost

Power as Mirror Image of

Dependence
Measuring dependency via Proxy Indicators
%age of sales or profits provided by u (utility and
switching cost)
Role performance in comparison with competitors
(Alternatives)
Limited application in sellers market
Superb role performance creates dependence
because excellence is scarce and valuable

The Greatest Source: Reward

Power
A reward is a benefit given in recompense to a
channel member for altering its behavior
Producer must have good value proposition to
the end user
Absence of value can not be compensated by
the reward

The Greatest Source: Reward

Power
Producer must pass 5 thresholds:

Quality Level
Price
Terms o trade
Producer Reputation
Reliable Delivery

Channel initiatives leading to reward

power are:
Boosting resellers capabilities
Excelling in logistics

Four More Sources of Power

Coercive Power
It stems from Bs expectations of Punishment by A,
if B fails to conform to A s influence.
It involves any negative sanction or punishment of
which a firm is perceived to be capable of.
Slotting fee
Reduction in margins
Withdrawals of rewards previously granted
Slowing down of shipments

Coercive Power
Coercion is viewed as attack
Provokes self defense
Indifference or withdrawal is a reaction to low
rewards but a counter attack is a reaction to
coercion
Coercion is less functional over the long run.
Not to be used unless all other avenues to
evoke change have been used.

Coercive Power
Reactions:
May be immediate or delayed
Target downgrade the value estimation by:
Dissatisfaction with the financial returns
Less satisfaction with non financial side of
relationship
Perceive relationship as more conflictual

Coercive Power
outcomes:
target is less cooperative (Short run)
Low level of trust (Medium run)
Low level of commitment by target (Long run)

Use coercive power when benefit is worth the

opportunity cost

Expert Power
It is based on the targets perception that
the influencer has special knowledge ,
expertise that is useful and that the target
does not posses it self
Durability of expert power can be
increased by:
Dole out expert power in small portions, always
retaining enough vital data to exert the power
Invest in continuous learning
Transmission of customized data only

Expert Power
Difficulties in exercising expert power
Trust
Status
Independent mindset

Legitimate Power
Power from contract agreement or
organizational relationships
It stems from the target companys sense that
it is in some way Obligated to comply with the
requests of the influencer
Target feel Morally , Socially and/or legally
constrained to feel a sense of duty ,of being
bound to carry out the influencers request

Legitimate Power
Sources of responsibility
Legal Legitimate Power (Objective)
Traditional Legitimate Power (Ephemeral)

Legitimate power stems from norms, values

and beliefs
Norms to be build are:
Solidarity
Role Integrity
Mutuality

Referent Power
It exists when B views A as a standard of
reference and, therefore wishes to identify
publicly with A

The Balance of Power

Net Dependence
Imbalanced dependence
Tolerating Imbalance Dependence

Net dependence
Dependence is never entirely one way
Countervailing power must be assessed
High and balanced power increased
coordination through creating win- win
situation and encouraging cooperation thus
reducing exploitation.

Imbalanced dependence:
Is exploitation Inevitable
More dependent party suffer economically as
well as in terms of non economic benefits
Asymmetric relationships tend to be
conflictual

Imbalanced dependence:

Countermeasures for the weaker

party
Developing alternatives to A
Organizing a coalition to attack A
Exiting the situation, removing itself fro
danger by no longer seeking the benefits A
provide.

Tolerating Imbalance
Dependence

No Reaction
Unstable environment
Stable environments
Equitable treatments
Distributive Justice
Procedural Justice

Exercising Power
Six Influence Strategies

Promise (Reward)
Threat
(Coercive)
Legalistic (Legitimacy)
Request (Referent, Reward, Coercion)
Information Exchange
(Expertise, Reward)
Recommendation
(Expertise, Reward)

The consequences of each

strategy
Promise (Reward)
Threat
(Coercive)
Legalistic
These provoke a backlash