Channel power

Channel power in marketing refers to the ability of intermediaries (such as retailers, wholesalers, and distributors) to influence the price, promotion, and distribution of a product. These intermediaries can wield significant power in the marketplace, as they control the distribution channels through which products reach consumers. Companies may need to negotiate with intermediaries in order to gain access to desirable distribution channels, and may also need to offer concessions (such as higher prices or exclusive distribution agreements) in order to secure these relationships. Understanding and leveraging channel power can be an important aspect of a company's overall marketing strategy.

Channel power determinants

There are several key determinants of channel power in marketing:

• Control over distribution channels: Intermediaries that control the distribution channels through which products reach consumers are typically in a strong position to exert their power. For example, retailers that control access to key locations, or wholesalers that control access to key distribution networks, may have more power than those that do not.
• Brand recognition and reputation: Intermediaries that have strong brands and reputations may be able to exert more power over suppliers than those that do not. This is because suppliers may be more willing to offer concessions in order to gain access to these intermediaries' distribution channels or customers.
• Volume of sales: Intermediaries that generate high volumes of sales are typically in a stronger position to negotiate favorable terms with suppliers. This is because suppliers may need these intermediaries in order to reach large numbers of consumers.
• Switching costs: Intermediaries that can create high switching costs for suppliers (i.e. the costs of leaving a relationship) are typically in a stronger position to exert their power. For example, intermediaries that have built up strong relationships with suppliers' customers may be able to exert more power than those that have not.
• Government regulations: Government regulations can also play a role in determining channel power. For example, intermediaries that are regulated by the government may have more power in certain markets than those that are not.

Channel power — recommended articles

Brand leader — Marketing — Retail strategy — Marketing mix — Price and non-price competition — Price Maker — Selective distribution — Market structure — Consumer markets

References

• Kadiyali, V., Chintagunta, P., & Vilcassim, N. (2000). Manufacturer-retailer channel interactions and implications for channel power: An empirical investigation of pricing in a local market. Marketing Science, 19(2), 127-148.
• Chung, J. E., Jin, B., & Sternquist, B. (2007). The role of market orientation in channel relationships when channel power is imbalanced. International Review of Retail, Distribution and Consumer Research, 17(2), 159-176.
• Sheu, J. B., & Hu, T. L. (2009). Channel power, commitment and performance toward sustainable channel relationship. Industrial Marketing Management, 38(1), 17-31.