In the world of digital marketing, vertical channel conflict is a common issue that arises when different channels or partners compete for the same customers. This can lead to an array of problems, such as cannibalization of sales, reduced profit margins, and increased tension between partners. In this post, we'll explore some of the most important questions about vertical channel conflict and how it can be addressed.
Vertical channel conflict occurs when different channels or partners that operate at different levels in the supply chain compete for the same customers. For example, a manufacturer may sell directly to consumers through their website, but also have third-party distributors that sell their products to retail stores. If the manufacturer's website starts to offer discounts that undercut the prices of their distributors, this could create tension and conflict between the channels.
There are several factors that can contribute to vertical channel conflict in digital marketing, including:
When left unchecked, vertical channel conflict can lead to a variety of negative outcomes for businesses and their partners. Some of these consequences may include:
There are several strategies that businesses can use to mitigate or resolve vertical channel conflict. These may include:
Ad tech and video marketing can both play a significant role in creating or exacerbating vertical channel conflict. For example, if a manufacturer uses programmatic advertising to target customers who have already purchased their products through third-party distributors, this could cause friction between the channels. Similarly, if a retailer invests heavily in video marketing to promote a specific brand, this could create conflict with other retailers who sell the same products.
Finance is another key factor that can influence vertical channel conflict. For example, if one partner is struggling financially and needs to increase sales quickly, they may resort to tactics that undermine other channels or partners. Alternatively, if there are discrepancies in payment terms or commissions, this could create tension or mistrust between partners.
Vertical channel conflict is a complex issue that can have far-reaching consequences for businesses and their partners. By understanding the causes of conflict and implementing effective strategies to mitigate it, companies can minimize the risks while maximizing the benefits of digital marketing.
