Academic research has shown precisely how companies can win the trust of intermediaries.  It offers models for working out the right kind of distribution channel for your product.  It can analyse power and how it can be used.

Yet most channel managers only ever learn about academics’ work indirectly from management consultants.

Here we look at what channels academia consists of, who the academics are and how their work is generally communicated to the outside world.

This is a very small world.  George John (Minnesota) reckons that there are only 30 academics carrying out serious research worldwide.  They all know each other.  Indeed, most American academics were students of Louis W Stern or are students of his students.

There are another dozen Europeans, mainly in the Nordic region and the UK, who follow a different, more qualitative, academic tradition.

Channels for most industries have been studied in great depth in the Nordic region.

So what is marketing channels as an academic discipline?  Its roots go back to the start of the century and to rather dry economic studies, which described the volumes and margins going through channels.  John recalls: "A lot of static, very descriptive papers which focused on the maths behind butter distribution and stuff like that."

Today, it has evolved into a subject that draws its inspiration from economics, sociology, psychology, politics and even anthropology. 

The subject was revolutionised by Louis W Stern at Kellogg in the late 1960s.  Using concepts from political science and sociology, he showed how channels were dynamic power structures, fraught with conflict.  He has shown how concepts such as power, trust and influence can be broken down into measurable indicators, allowing suppliers to see what steps they should take to systematically build power.

Stern’s theories brought the subject to life for academia in the USA.

Meanwhile, in Europe, a group of academics were pioneering a more qualitative, empirical approach which looks at the wider network and says that companies are defined by the network of their relationships.  They include Hakan Haakonsson (Norwegian School of Management), David Ford (Bath), Lars-Erik Gadde (Chalmers) and Ivan Snehota (Stockholm School of Economics), who together founded the International Marketing and Purchasing Group in 1976.

The European IMP tradition remains strong today, particularly in Sweden, where Per Andersson and Lars-Gunnar Mattsson (both at the Stockholm School of Economics) and Lars-Erik Gadde (Chalmers University) have produced a lot of qualitative, long-term case studies looking at how channels change over years, even decades, within a specific industry.  Around 300 academics will attend the annual IMP forum at Lugano.

Per Andersson says: "We tend to focus perhaps on the wider network of relationships than some US researchers. I would argue that you can’t study mobile telephony distribution without also looking at IT channels and retail and at how the mobile phone has changed over time to become a commodity." Andersson says that channels for most industries have been studied in great depth in this way in the Nordic region, where there is a tradition of strong co-operation between industries and academia.
 
Stern’s theories brought the subject to life for academia in the USA. His influence is still huge. The focus stayed on conflict and power throughout the 1970s.

In the 1980s, Erin Anderson (INSEAD) and Stern’s former student John (Minnesota) started testing these concepts in the real world using transactional economics, a model pioneered by Oliver Williamson.  Anderson, for instance, looked into when it is best for suppliers to own their channels, and when they should spin them out to third parties.

Anderson says: "I call transactional economics economics for realists, as it takes into account psychology and sociology.  Essentially, we gather data and look for patterns."  John says: "I want to formulate a hypothesis and then test it against the data." 
 
This means they can look at the impact on human behaviour of different economic relationships.  How, for instance, does the behaviour of a freelance sales rep. on 30 days’ notice differ from that of an employee?  This can lead to the construction of complex mathematical models to explain things that the average businessperson would never ask.

Essentially, we gather data and look for patterns.

Both Anderson and John have worked with a lot of doctoral students who have gone on to become academics themselves.

Richard Staelin (Duke) leads a more abstract school, which reduces channels to mathematical models.

Other US academics include Stern disciple Nirmalya Kumar, who is moving to the London Business School from IMD, and has developed Stern’s theories in the retail sector. Bart Weitz (Florida) also studies retail channels.  Jim Brown (Virginia Polytechnic)  studies conflict – what causes it, how to measure it and how to fix it. Anne Coughlan (Kellogg) looks at grey markets.

Lisa Scheer (Missouri) studies persuasion – the psychological processes by which upstream and downstream players reach agreement.  Sandy Jap (Emory) analyses Internet reverse auctions and how organisations build and enhance relationships. Pat Kaufmann (Boston) looks at franchises, EDI and contracts. Together with Francine LaFontaine (Michigan), he produced a seminal paper on the McDonalds franchising system.

Ivory-tower-syndrome is a particular problem in America.

Gary Frazier (Southern California) analyses power and influence in industrial distribution. Jakki Mohr (Montana) specialises in communication and conflict.  Arne Nygaard specialises in franchising.  Jonathan Hibbard (Boston) is a former Stern student examining relationships and relationship valuation.

John’s former students Shantanu Dutta (London Business School), Mark Bergen (Minnesota) and Jan Heide (Madison) work together, often producing joint papers covering subjects such as the grey market and how and when suppliers should compete with their distributors and agents.

In the UK, Stuart Hamner-Lloyd (Gloucester)  focuses particularly  on channel relationships and has several doctoral students looking at the field.

Academics from the US and European traditions do communicate, but Per Andersson says: "You tend to belong to one tradition or the other."  Other academics say that the Americans totally ignore the qualitative European tradition. But two US academics – Narus and John – said they felt that the Europeans did produce the best and most relevant work today. 

All this begs the question,  why do this research?

To the outsider, some quantitative academic studies look like elaborate steam hammers being used to crack fairly unimportant nuts. 

George defends the approach. "We are developing what if spreadsheet models that should be able to predict actual behaviour. I think we are close to doing this today." Anderson adds: "Academics test out ideas that may sound obvious only to discover their limits. We go beyond the unrepresentative anecdotes. Academics are here to figure out why and not just what, and to prove it." 

But many feel that academics, particularly from the American tradition, are too remote.

Jim Narus (Wake Forest), who works with Jim Anderson (a colleague of Stern at Kellogg) on industrial distribution and the most effective route to market, says: "As an academic you have to be good at three things – you have to be able to build conceptual models, you have to do the research properly and you have to be able to interpret it for management practice. Very few academics are big hitters who can do all three."
He singles out the big hitters as Stern and, in the younger generation, Kumar, Erin Anderson and Per Andersson.
 
Narus feels that ivory-tower-syndrome is a particular problem in America.  "As far as I am concerned, unless what I do can inform business, then it is not worth carrying out. But that is not the approach of all channel academics. Often in North America they get their data from academic institutes and so are not forced to seek sponsors from industry. Most have never worked in industry themselves."

E.commerce and dot.com poisoned the channels area.

Nygaard agrees, adding: "US academia is surprisingly theoretical, with far fewer links to industry than in Europe."

This is reflected in whether academics are prepared to take on consultancy work from industry. John says that he and his colleagues decided long ago to put severe limits on this. Others make three times their academic salary from consultancy.

You can distinguish between academics who do a lot of mathematical modelling, such as Heide and Dutta, and those such as Anderson, Narus and Kasturi Rangan at Harvard who produce more pragmatic, empirical work. The empirical European tradition has much closer links with industry.  Per Andersson says: "I would say that most of the companies we study are heavily influenced by our work."

Will the field grow?  Narus is pessimistic about the short term. "E.commerce and dot.com poisoned the channels area. A lot of people have cut back.  I went to a big meeting last autumn at Penn State and the company managers were all saying ‘we don’t want any more channel initiatives.’” Erin Anderson argues that the sheer complexity of channels can deter academics.

Ford goes even further, arguing that, after a flood of creativity in the 1970s, channel management per se has run out of theoretical insights.

Part of the problem is the lack of communication between academics and the outside world.  Academics tend to publish in obscure journals that are read only by their peers. And much of what they publish is too opaque, owing to its technical complexity, for the average, harassed marketing or sales manager. Narus says that recent studies show that the publications put out by management consultancies are far more likely to be read.

The problem is the lack of communication between academics and the outside world.

Yet if management consultancies form the communication route, then it is not a very efficient one.  John reckons that there are only 80 academics worldwide giving courses in channels. Only a tiny fraction of the MBAs on these courses will specialise in the field or be recruited to do channel consultancy. 

Nor have the academics produced a gutsy bestseller on the subject.  The best way to get a thorough overview of what the US academic discipline offers is to buy Marketing Channels by Anne Coughlan, Erin Anderson, Louis W Stern and Adel El-Ansary.  Clearly written and loaded with case studies, this is not a difficult read and its notes contain a fairly exhaustive list of everything published of any importance.  But it remains a good textbook, rather than a management bestseller. 

Managing Business Relationships by David Ford, Hakan Haakonsson, Lars-Erik Gadde and Ivan Snehota summarises the approach adopted by the IMP school. The IMP website at impgroup.org also contains a useful library of papers and other books.

A lack of hard data remains a huge concern for all channel academics.  You could argue that the subject has tended to develop as a soft social science, because it is so much easier to ask intermediaries or retailers about their feelings, rather than to engage in serious financial modelling.

Dutta says: "If you are in a subject such as marketing or advertising, you have access, via companies like Nielsen, to a lot of good data.  But these research companies tend not to work in channels, and so channel academics have to carry out their own primary research."

What of the future?  Academics in the USA feel they are not far from being able to predict behaviour from particular channel structures. Jonathan Hibbard at Boston University says: "Today there is more emphasis on quantifiable things, such as channel performance. People are trying to be more applied."

David Ford at Bath takes a different tack. "The idea of channels, the idea that you can set a channel strategy and exert power over partners, is really rather redundant. Today companies live, and are defined, by the network of their relationships.  That is the future."

RTMA: A bridge to academia

The Routes to Market Association has long acted as a bridge between academia and industry.  In some cases, RTMA members have funded research. RTMA meetings also provide a forum that is regularly attended by academics eager to learn more about industry’s concerns. And several academics have addressed our meetings.

From the point of view of industry, academics can provide companies with new insights and with a way of testing and validating ideas.

So, the next time you are confronted with an issue with a lot of hard data, why not give the Routes to Market Association a call?

We will be happy to put you in touch with an academic who might be interested in getting involved.  Anderson says: "Academics are always hungry for new material and confidentiality is assured!"

IMP: An alternative view

Professor David Ford of Bath University reckons that the whole concept of channel management is just plain wrong. “Suppliers still perceive channels as a series of pipes to take their products and services.”

He adds: “Suppliers, particularly with industrial or IT products, still often feel they own their channels. They feel that their products are delivered by their channels. They also feel that they have real power over these channels."

Ford argues that this supplier-centric view of the world is entirely false and that you have to look at the wider world.

Indeed, he goes as far as to argue that all companies are essentially defined by their relationships with a network of others.  "Take RS Components, a big UK electronics components’ distributor famed for its next-day delivery service. Why does it exist?  I would argue that it exists precisely in order to stop its customers (who are bearded techies) from having to think about when they are going to get their product.  It is defined entirely by this function."
Or take Ericsson. "The way it has developed was entirely dependent on its relationship with Norwegian telecoms operator Telia.  All its products came out of this relationship.  Ericsson was defined by the Telia relationship."

And he suggests that products are radically changed by the channels that add services to them and deliver them to the end-customer. The product that leaves your intermediary for the customer is not the same product as the one you shipped him.

Ford argues that the big danger is that suppliers don’t understand that they are defined by relationships, and seek to use power they haven’t got.  This is why so many channel initiatives fail. 

And the really big danger?  That is when suppliers sucessfully wrest power from their intermediaries and dictate to their channels. Everything works fine for a while, but if the supplier has total power then everything depends upon his initiative. And the moment he makes a false step the entire network sinks like the Titanic.