In this lecture, we'll focus on a very important concept called managing channel conflict. Anytime you have a partner who helps take your products or service to the market to the consumer, there are opportunities for conflict. It's good to understand when this conflict occurs and how you can mitigate it. There are two types of conflict that are possible. The first one is between us and our channel partners. We often refer to that as vertical conflict and the second is a possible conflict amongst our various channel partners that then perturbs the channel as a whole. So think of vertical conflict. Some years ago, Costco decided not to carry Coca-Cola in its stores. That's a conflict between Coca-Cola, the company, and Costco; its retailer. Horizontal conflict comes in different shapes and sizes but broadly speaking a dominant form of horizontal conflict that we need to think about is what we call as free riding. This is problems amongst your channel partners. Typically, free riding occurs when a low service, low-price retailer hurts a high service, high price retailer. So a consumer can go to a high service, high price retailer. They are higher price because they provide the higher service. Get educated about the product, get all the information about the product, and then go to a low service store to buy the product. A typical example of that we refer to as showrooming. So Best Buy for example, argued that they were the showroom for Amazon. So people came to Best Buy. They studied all these high-end televisions, see how the picture was or amplifiers and had other audio equipment. They experienced it there, understood what they were going to buy but then click the button, went to Amazon and purchase it from there. Amazon responded back by coming up with the concept of what we call as webrooming, which is I have so much information on the web about various products and services. People come to the website, look at these products, try to understand them, compare them with other products. We have comparison engines but then because they need it tomorrow, they go to the other store and then buy it right away and take it home because they want to watch the Superbowl the very next day and we can't deliver the next day, at least at that time they couldn't. So I think these are both examples of what we call as horizontal conflict, either showrooming or webrooming. How do we manage such conflict? I think the first thing for all of us to do is to understand what are the underlying drivers of conflict. The best way to manage conflict in my view is through good design of the channel. Be clear on who will do what. Whose job is it to provide information? Whose job is it to provide logistics? Then what is the appropriate compensation for their activities? Also, put up right away and upfront what actions will be taken when infringement occurs. Eliminating conflict is not the goal, managing it so that it's healthy and not disruptive is a more reasonable objective in channel management.