Question

How does channel conflict figure into your pricing decisions? How do you minimize channel conflict?

Answer 1

When multiple businesses are selling the same product, there’s danger of a pricing war. One undercuts the price of the others, hoping to make it up in additional sales. Then someone pushes the price even lower, and customers begin to get confused. Are the low-priced items as good as the higher priced items? Your products can lose value in the eyes of the end users.

Another effect of pricing battles is that the prospect will often hold up on a buying decision and wait for the price to drop even lower. That can lead to sales stagnation. Additionally, those who have already purchased your goods will feel cheated when they see lower prices. That can lead to higher return rates and degradation of your brand.

Price wars can also weaken your distribution channel. They can lose interest in promoting your company’s products, maybe even stop carrying your goods and look to your competitors. When the focus is on the pie, some might go away hungry.

Minimize Channel conflict in smart way

Smart companies keep the focus on the customer and get everyone who touches their products engaged in providing superior value to the customer. That puts the pie in a different light altogether. All stakeholders can unite in an effort to keep prices stable and share the pie fairly.

As the manufacturer, you can sit down at the table shoulder-to-shoulder to help pen agreements that outline the rights and responsibilities of every member of the sales effort. Your own participation can be a part of that strategy.

With a customer-centric effort, it won’t be difficult to show your distribution partners why it is important for you to join the effort and how your part will help everyone do better.