Getting Multi-Channel Distribution Right

CHAPTER 6Using Power Without Using It Up

6.1 INTRODUCTION

Consumer loyalty can create and communicate power, but it doesn't automatically translate into a sustainable channel strategy. Natural springs, rivers, and wells are good sources of water, but you need pumps and pipes to irrigate the fields. In the same way, power must be applied in designing channel strategies and instituting policies that will (1) encourage or require the desired behavior by channel partners; (2) result in higher sales, market share, profits, and growth rates; (3) reinforce horizontal power; and (4) enable more options in adapting to market developments.

Power is a resource to manage in the present and for the future. It should show up in a firm's performance in the longer term if not right away, but using power only to maximize one's current position or profits is not smart. Companies understandably want to be free from the constraints that powerful channel partners may want to impose on their ability to chart their own course. Properly accumulated and applied, power preserves an organization's freedom to act in evolving circumstances and an uncertain future. In fact, along the lines of speaking softly but carrying a big stick, just the knowledge of unexercised power may yield dividends, while, once used, power may be “used up,” as Professor Ray Corey, was fond of saying.

6.2 APPLYING POWER IN CHANNEL RELATIONSHIPS

It is in the application of power that we believe the work of social psychologists ...