Channel power

Channel power refers to the ability of one member in a distribution channel to influence the decisions and behavior of other channel members. The concept was formally defined by El-Ansary and Stern in 1972, who described it as a channel member's capacity to control the marketing strategy decisions of another member at a different distribution level^[1]. Channel power shapes relationships between manufacturers, wholesalers, retailers, and other intermediaries in supply chains.

Theoretical foundations

The study of channel power draws heavily from social psychology research. John French and Bertram Raven published their influential paper on power bases in 1959, identifying five fundamental sources of social power^[2]. Marketing scholars adapted these concepts to distribution channel contexts throughout the 1970s and 1980s.

John Gaski's 1984 article "The Theory of Power and Conflict in Channels of Distribution" provided a comprehensive framework that remains widely cited. He examined how power dynamics create both cooperation and conflict among channel partners^[3]. The relationships between manufacturers and retailers have been studied extensively since then.

Sources of channel power

French and Raven's original five power bases translate into specific sources within distribution channels:

Reward power

Reward power exists when one channel member can provide valuable incentives to another. A manufacturer might offer retailers volume discounts, promotional allowances, or exclusive territories. Distributors may provide suppliers with access to lucrative market segments. This power base depends on the recipient valuing what is offered.

Coercive power

Coercive power operates through threats and punishments. A dominant retailer might threaten to drop a supplier's products. Manufacturers may withdraw cooperative advertising funds or reduce service levels. Coercive tactics often generate resentment and can damage long-term relationships. Studies by Hunt and Nevin in 1974 found coercive power frequently leads to conflict^[4].

Legitimate power

Legitimate power derives from contractual relationships or established norms. Franchise agreements grant franchisors significant legitimate power over franchisees. Authorized dealer agreements similarly establish formal authority. The power stems from both parties accepting the legitimacy of the arrangement.

Referent power

Referent power emerges when channel members identify with each other or share common goals. Retailers may want association with prestigious brands. Small manufacturers might seek partnership with established distributors for credibility. This power base develops gradually through relationship building.

Expert power

Expert power comes from specialized knowledge or skills. A manufacturer with superior technical expertise holds power over distributors who depend on that knowledge. Retailers with deep customer insights possess expert power relative to manufacturers. This source rewards investment in capabilities and information systems.

Informational power

Raven added informational power as a sixth base in 1965. It differs from expert power by focusing on specific information rather than general expertise. Point-of-sale data controlled by retailers represents informational power. Manufacturers holding proprietary market research also exercise this power.

Market power versus bargaining power

Scholars distinguish between two types of power in channels:

Market power derives from a firm's position relative to end consumers. Strong brands give manufacturers market power. Prime retail locations provide retailers with similar advantages. Market power allows a firm to capture greater value from final transactions.

Bargaining power refers to negotiation skill and leverage. A party might lack market power but possess strong bargaining position through alternatives or information. Contract negotiations reveal bargaining power dynamics clearly.

The distinction matters because strategies for building each type differ substantially. Market power requires investment in brand equity or customer relationships. Bargaining power can be enhanced through diversification and information management.

Power and channel structure

Power relationships influence how distribution channels are organized. Several patterns emerge:

Manufacturer-dominated channels occur in industries with strong brands or proprietary technology. Luxury goods and pharmaceuticals often exhibit this pattern. Manufacturers dictate terms and select channel partners carefully.

Retailer-dominated channels characterize markets where retailers control consumer access. Grocery retailing demonstrates this structure, where chains like Walmart exercise enormous power over suppliers. The growth of large retail chains since the 1980s shifted power toward retailers in many industries.

Balanced channels feature relatively equal power among members. Specialized industrial products often show this pattern, where manufacturers and distributors depend heavily on each other.

Managing channel power

Channel members employ various strategies to build or maintain power:

• Differentiation reduces dependence on specific partners
• Vertical integration eliminates reliance on independent channel members
• Information systems provide data advantages
• Exclusive arrangements lock in partners
• Relationship building creates switching costs through trust and routines

Firms lacking power often form alliances or cooperatives. Independent retailers join buying groups to counter supplier power. Small manufacturers use manufacturer's representatives to access markets efficiently.

Consequences of power imbalance

Significant power asymmetries produce several effects:

Profit distribution shifts toward the powerful party. Dominant retailers extract favorable prices, promotional funds, and payment terms from suppliers.

Conflict increases when weaker parties feel exploited. Litigation and regulatory complaints often result from severe imbalances.

Channel stability may suffer as weaker members exit or seek alternatives. However, some research suggests moderate power use promotes stability by establishing clear expectations.

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References

• El-Ansary, A.I. & Stern, L.W. (1972). Power Measurement in the Distribution Channel. Journal of Marketing Research, 9(February), 47-52.
• French, J.R.P. & Raven, B. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in Social Power. Ann Arbor: Institute for Social Research.
• Gaski, J.F. (1984). The Theory of Power and Conflict in Channels of Distribution. Journal of Marketing, 48(Summer), 9-29.
• Hunt, S.D. & Nevin, J.R. (1974). Power in a Channel of Distribution: Sources and Consequences. Journal of Marketing Research, 11(May), 186-193.
• Raven, B. (1965). Social influence and power. In I.D. Steiner & M. Fishbein (Eds.), Current Studies in Social Psychology. New York: Holt, Rinehart & Winston.

Footnotes

1. El-Ansary, A.I. & Stern, L.W. (1972). Power Measurement in the Distribution Channel. Journal of Marketing Research, 9(February), 47-52.
2. French, J.R.P. & Raven, B. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in Social Power. Ann Arbor: Institute for Social Research.
3. Gaski, J.F. (1984). The Theory of Power and Conflict in Channels of Distribution. Journal of Marketing, 48(Summer), 9-29.
4. Hunt, S.D. & Nevin, J.R. (1974). Power in a Channel of Distribution: Sources and Consequences. Journal of Marketing Research, 11(May), 186-193.

Author: Slawomir Wawak