How Does Communication Strategy Affect Channel Member Performance?
Benefits of Communication. A key question that arises in managing channel systems is, What strategies should companies use to enhance channel member performance? One strategy that managers have under their direct control is that of communication. Good communication not only promotes effective channel functioning but also has the potential to enhance channel member performance. Manufacturers that provide information to dealers can expect them to better understand their products, to more effectively coordinate marketing programs, and to more efficiently move their products to customers. At the same time, manufacturers that use information from dealers can learn more about local market situations and adjust their programs and products to better meet customer needs.
Two Models of Communication. Our research examines the role of communication strategy in managing channel member performance. We compare two models of how communication can affect performance. The first, called the moderator model, proposes that communication strategy must be tailored to fit the particular channel conditions in which the firm operates. The tailoring approach allows manufacturers to economize on communication efforts in less important relationships, while ensuring that more important relationships receive greater attention. The second, called the mediator model, proposes that more communication between firms is better, regardless of channel conditions. Firms seeking to strengthen channel member performance should amplify their communication with downstream channel members.
Study Purpose and Approach. By understanding which approach more effectively enhances performance, managers can better choose and implement channel communication strategies. To advance this understanding, we conducted a study whose goal was to determine whether different types of communication are appropriate under different channel conditions or whether more collaborative communication (i.e., frequent, bi-directional, formal, and noncoercive) improves performance regardless of channel conditions. The channel conditions we considered were trust and support between channel members, distribution of power in the channel, and the formal arrangement of members in the distribution system. The communication characteristics we considered were the amount of contact between channel members, the extent of two-way communication, the extent to which contacts between members were planned rather than ad hoc, and whether the strategies used to influence channel member actions were noncoercive. We surveyed 125 dealers of personal computing products, asking them for their perceptions about channel conditions and their relationships with manufacturers, with particular emphasis on communication behaviors in these relationships.
Study Findings: Collaboration Enhances Performance. While our results do not support the moderator model, there is some initial support for the mediator model of communication-more collaborative communication is better regardless of channel conditions. More specifically, we found that communication that is frequent, goes in both directions, is regularly scheduled and planned, and relies on requests and recommendations rather than threats has a strong, direct impact on enhancing channel member performance, as measured by dealers' sales volume of manufacturers' products. Our findings further show that favorable channel conditions alone are not sufficient to ensure strong channel performance. To realize the benefits afforded by trust, power, and formal channel structures, manufacturers must use communication tools effectively. Dealers can use our results as well in shaping their own strategies. Those in supportive, highly structured relationships can expect more collaborative communication from manufacturers, which in turn should help them sell more of those manufacturers' products. Dealers finding themselves in less supportive, loosely structured relationships, where communication is less collaborative, may want to encourage greater communication or possibly give greater attention to competing product lines.
Jakki J. Mohr is Assistant Professor of Marketing, College of Business and Administration, University of Colorado. Robert J. Fisher is Assistant Professor of Marketing, Graduate School of Business, University of Southern California. John R. Nevin is Grainger Professor of Marketing, Graduate School of Business, University of Wisconsin.
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