Channel PowerMktg 427 – Chapter 6 (Part 2)

Learning Objectives

1. Explain how to use power as a tool to manage conflict and increase cooperation

2. Understand the importance of the balance of dependence and whether the weaker party should exit the relationship or take countermeasures

3. Distinguish six strategies for converting power into influence and project a channel member’s reaction to each influence strategy.

4. Describe how the framing of an influence attempt drives the target’s reaction

The Balance of Power• POWER is not the property of an organization. It is the

property of the relationship.

• Do not say “A is powerful”, it is misleading. • Correct statement: “A is powerful in relation to B but may be

weak in relation to some other party”.

• Also, in the A and B relationship, A has some sources of power of its own, but so does B. B has countervailing power, its own power bases, which it can use to offset the power sources of A.

The Balance of Power

NET DEPENDENCE

• Dependence is not one way. Just as B depends on A to provide utility, A depends on B for utility of a different type.

• A and B are interdependent – A’s dependence on B creates countervailing power for B to use against A. This blunts A’s ability to pressure B to alter it’s behavior.

• To get a complete picture of power, net dependence should be assessed in addition to each side’s dependence.

The Balance of PowerNET DEPENDENCE• High mutual dependence is synonymous with High mutual

power.

• When each party has leverage over the other, it can be used to drive coordination, to enhance cooperation.

• Countervailing power must be assessed and net dependence calculated. But at what level?....

• Ordinarily, a decision maker should consider its relationship with one channel member and calculate net dependence in the pairing. But this can change and sometimes abruptly. Single channel members can come together and form a coalition.

The Balance of Power

NET DEPENDENCE• High mutual dependence is conducive to creating and

maintaining strategic alliances and achieve coordination.

• A channel is coordinated when every single member will work towards maximizing overall channel profit.

1. The two sides can drive each other to craft and implement, creative, win-win solutions

2. High and balanced dependence encourages cooperation by blocking exploitation.

The Balance of Power• IMBALANCED DEPENDENCE

• WHAT HAPPENS WHEN ONE CHANNEL MEMBER IS MORE DEPENDENT THAN THE OTHER?

The Balance of Power• IMBALANCED DEPENDENCE: Countermeasures for the

WEAKER PARTY.

1. Developing alternatives to A2. Organizing a coalition to attack A3. Exiting the situation, removing itself from danger by no

longer seeking the benefits provided.

Exercising Power: The Influence Strategies• The more that parties have power, the more they tend to use

it. Latent power is rapidly converted to exercised power.

• How is latent power converted into exercised power? Communication.

1. Promise strategy2. Threat strategy3. Legalistic strategy4. Request strategy5. Information exchange strategy6. Recommendation strategy

Exercising Power: The Influence StrategiesInfluence Strategy Power sourcePromise Strategy If you do what we wish,

we will reward you.Reward

Threat Strategy If you do not do what we wish, we will punish you.

Coercion

Legalistic Strategy You should do what we wish because in some way you agreed to it. (Contract or Norms)

Legitimacy

Request Strategy Please do what we wish Referent, Reward, Coercion

Information Exchange Strategy

Without mentioning what we wish, pursuing a general discussion about the most profitable way for the counterpart to do business.

Expertise, Reward

Recommendation Strategy

Same as information exchange, but the influencer states the conclusion

Expertise, Reward

Exercising Power: The Influence Strategies• CONSEQUENCES OF EACH STRATEGY

• The first three styles (promise, threat and legalistic) often provoke a backlash. This is because they are perceived as heavy-handed, high-pressure techniques. Counterparts resent them and tend to respond by using the same strategies themselves.

• The conclusion, the promise strategy, while self-perpetuating is an effective way to change a channel member’s behavior, even though it raises interpersonal tension.

Exercising Power: The Influence Strategies• CONSEQUENCES OF EACH STRATEGY

• The last three influence strategies (recommendation, request, information exchange) are more subtle and nuanced than the first three.

• Channel counterparts welcome these efforts and do no take offense at their use. These three strategies increase all facets of a counterpart’s satisfaction economically and interpersonally.

Exercising Power: The Influence Strategies• CONSEQUENCES OF EACH STRATEGY

• For close, long-term relationships, recommendations, information exchange and promises are the dominant influence strategies.

• In these more committed relationships, the parties refrain from threatening each other and spend little time making requests without stating a reason. Offering reward is a frequently used strategy.

Exercising Power: The Influence Strategies• HOW TO FRAME AN INFLUENCE ATTEMPT

• “What you present is less important than how you frame it.”

• For example, take a distributor that is already carrying a supplier’s line. The supplier is launching a major, risky, unproven new product and wants to influence the distributor to agree to carry it as well. How should the influencer frame the message to the target?

1. If you do take on our new product, you will get substantial additional marketing support.

2. If you do not take on our new product, you will not get substantial additional marketing support