Channel Conflict: A Complete Guide

Say “channel conflict” to a partner leader, and you’ll send shivers down their spine.

It’s one of the most stressful situations to be in and happens more often than you think. Two different partners start working the same deal. A potential customer wants to work with a different partner than the one you’ve already pulled into an opportunity. A customer wants to go direct with you. 

Though channel conflict is inescapable, there are ways to minimize it. And when you do have to address the elephant in the room, you want to be the vendor that partners remember as fair, honest, and even creative.

Below, we share more about the types of channel conflict you may find yourself in, how to avoid those situations, and strategies to overcome conflict when it inevitably arises — with advice and anecdotes from partner experts weaved in.

What is Channel Conflict?

Channel conflict happens when multiple distribution channels compete with each other for sales. As you can imagine, this causes friction between all parties involved and can undermine everyone’s business objectives — including your end customers’.

Channel conflict can happen in a few different ways:

Vertical Channel Conflict

Vertical channel conflict happens when there’s an issue between different levels of a supply chain or distribution channel.

For example, if a vendor sells directly to consumers through its own e-commerce site or sales team, it’s competing directly with resellers or distributors (especially if it offers lower prices). Other examples of vertical channel conflict include:

• Inconsistent product availability: one partner gets more access to a supplier’s stock than another.
• Misaligned promotions: a partner devalues a vendor’s products with excessive discounts.
• Territory expansion: this flavor of direct conflict happens when a vendor builds out a sales team in a geo or industry that a distributor or partner previously owned.
• Sales isn’t bought in to “partner influenced deals”: In SaaS, there are times when direct sales folks attend partner-sponsored conferences and events. They often don’t want to share credit for any qualified leads they speak to there because it’s cutting into their commission.

Horizontal Channel Conflict

In contrast to vertical conflict, horizontal conflict happens between entities at the same level in a distribution channel, i.e., between partners. Partners are all selling the same product or service, and they’re targeting a similar ideal customer.

Typically, horizontal conflict happens when:

• You have overlapping territories, which increases the chances two partners will bring in the same deal.
• Partners sell at drastically different prices, undercutting partners that can’t make those discounts work with their business model.
• Partners get inconsistent support or information, giving one a leg up on the other. 
• There is margin erosion; the profitability of selling a vendor’s product goes down because partners compete on price for the same customers.

Ecosystem Conflict

In recent years, marketplaces have opened the door to a new kind of conflict. Ecosystem conflict can happen when:

• A company’s direct sales team isn’t enabled properly. A lack of understanding can push internal sales folks to handle deals themselves rather than having a channel partner and a cloud partner work together.
• There’s tech stack overlap. Partners within the ecosystem may offer solutions that compete or overlap with each other, creating confusion for customers and complicating channel or co-selling efforts.
• There’s ambiguity in the role of different ecosystem players. Sometimes service integrators also start reselling products, which can impact traditional resellers or distributors.

7 Ways to Avoid Channel Conflict

1. Don’t Oversaturate

As your program expands, the potential for channel conflict becomes higher. Why? Because, presumably, your total addressable market hasn’t changed. So, with more distributors, wholesalers, and partners in the mix, there’s a higher chance they’ll step on each other’s toes.

For you, this means you’ll need to think extra carefully about the types of partners you bring on and how you’re engaging with them. If you already have several partners in one category, maybe you should focus your efforts on onboarding a new, different category that doesn’t compete as much or target partners in a totally different geographic region.

“Focus is super important. There’s only so much you can give your partners and only so much you can do to prevent conflict,” says Courtney Broadwell at Cyera.

“Concentrate on building a few great partnerships rather than broadening your reach right away. When you work with the right partners, you’ll drive the right outcomes for your customer.”

Partner Business Advisor Morten Søger, agrees: 

“It’s critical not to have too many partners in the same region or area. Find what partners’ sweet spots are and let them operate there. Or, if you must onboard two partners who have similar goals and target markets, just know that there’s a higher potential for conflict.”

2. Make Your Program Rules Clear (Internally and Externally)**

It’s a universal rule that the key to a great relationship is communication, and it’s no different in partnerships.

The more information you can provide partners upfront about how your program works, the fewer incidents you’ll have and the easier it will be to justify any channel conflict-related decisions you make. Make those guidelines accessible from your partner portal (in the library and on the home page) so that partners can reference them at any time.

You’ll want to make sure your internal sales team knows their role in the channel, too. “Salespeople are all about selling and hitting their targets,” Raegan Wilson at Spur Reply, explains. ”They will do whatever it takes. So think hard about what guardrails you can put in place to prevent them from becoming their own worst enemy.”

**More on best practices for creating these rules below.

3. Standardize Your Onboarding Process

Giving any partner preferential treatment (unless you’ve specified how you’re doing it in your tiering standards) is a recipe for channel disaster. Every time a partner joins your program, the experience should be the same, from reviewing their role in the sales process to showing them where to find product information to explaining how to submit deals. 

Write a standard operating procedure to keep the process consistent. At a high level, a partner joining your program should trigger:

1. An invite to a one-on-one meeting with their partner manager, who runs through the same presentation for every partner under their purview. You might also consider filling out a joint business plan to solidify your goals for the relationship. 
2. An invite to your partner portal. Make sure they have the same permissions as every other partner in their category and tier. Create a video to show them around the portal, pointing them to training courses, marketing assets, and deal, lead, and referral rules.
3. Enrollment in ongoing email marketing sequences to remind them of perks, SPIFFs, and channel co-marketing opportunities to increase partner engagement.

Trish Rilling at Grititude has another tip, “After every conversation, recap everything via email. Be sure to outline all the topics that were discussed while also including next steps needed to keep everyone on the same page.”

4. Customize Your Offering For Each Channel

Every channel partner runs their business differently. Catering your offering to the way they work can help them feel valued and prevent them from competing with one another for the same opportunities. You can minimize conflict by:

• Providing exclusive products or bundles to specific channels. This encourages customers to use the intended channel (without competing against other channels offering similar items).
• Offering exclusive product lines. That way, partners can focus on their specific markets without feeling threatened by each other.
• Implement a minimum advertised price (MAP) policy. This sets a baseline price for which products can be sold to stop partners from giving customers extreme discounts that other partners can’t match.
• Institute channel-specific incentives. Internal sales teams, distributors, and partners all have different motivations. Play into those wants and needs by offering comp kickers, better margins, or exclusive access to product betas or marketing opportunities.

5. Regularly Schedule Account Mapping Sessions

Account mapping sessions are a great way to get ahead of channel conflict. Seeing which accounts partners plan to go after ahead of time can help you identify potential conflicts and squash them before they turn into bigger issues.

Stacy Desrosiers at Lewis Rhodes Labs notes, “If you’re doing an account mapping session with account 1 and three of the customers they come up with have already been logged as deal registrations by account 2, you can reference your rules of engagement and say those accounts won’t be accepted. That way, partner 1 isn’t wasting their time.”

6. Communicate Any Changes Early and Often

Communication is critical in all phases of your program — not just when you launch it. If you make changes to any policy, you need to make that explicitly clear to partners, through a mass email, through one-on-one partner manager calls, through announcements in your partner portal.

If you know this change is coming, preview it early. That way, partners have ample time to prepare and ask questions. And if you have a feeling some partners may leave the program as a result of the change, your partner managers will have more time to recruit new partners who will participate under your terms and conditions.

7. Monitor Your Program Closely

One of the best ways to prevent conflict? Look at your channel data. Felix Milshtein at vcita explains: “Regularly reviewing performance data and feedback from all channels helps catch any potential conflicts early and helps you refine your system, ensuring each channel feels valued and aligned with the overall goals of your businesses.”

Consider tracking:

• Deal registration approval rates and response times
• Lead acceptance and close rates
• Customer overlap (and deal conversion rate in those scenarios)
• Direct versus indirect revenue (and win/loss for partner versus direct sales)
• Partner pipeline contribution per month or per quarter
• Incentive use and effectiveness

These metrics help identify potential friction points before they escalate, helping you adjust your strategy, redefine partner territories, and make sure incentives like deal accelerators or comp kickers are working across your partner ecosystem and internally.

Trish suggests hosting quarterly business reviews with your partners. Like your internal QBRs, these meetings can “communicate what is working well, what matters might need immediate attention, and help identify potential items that could escalate conflict.”

Best Practices for Partner Program Rules

When it comes to channel conflict, an ounce of prevention is worth a pound of cure. But, as Raegan points out: “People often don’t think channel conflict is going to happen to them, so they don’t develop rules of engagement or don’t put a lot of rigor around their process to handle it. And that’s a mistake.”

Here’s what to consider as you build out (or revise) your program rules for Deal Registration, Lead Distribution, and Referrals — and whether you should make exceptions.

Deal Registration Rules

Deal registration is the biggest source of channel conflict, and it can come from your partners or your internal sales folks. Use these questions as a guide to formalizing your rules.

For External Conflict

First, set your acknowledgement SLA. When will partners know when you’ve accepted their registration?

Next, outline your eligibility criteria:

• Does the registration have to be for a new customer? 
• What’s your minimum deal size? 
• Is there a required sales stage the deal must have reached?
• Do you have region or industry requirements?

“Before you even accept your deal reg — because that means you’re committing to it — really vet the opp,” Stacy advises.

“I recently had a fantastic partner bring us a deal, but as we went through the account, I realized they might not be the best partner to handle it. Discovering that early meant I could offer the deal to a different partner and bring this partner an alternate lead.”

Then, think through the process:

• Do you require regular updates to deals on key milestones? 
• What about noting the competition involved in the deal? 
• How long is the registration theirs before another partner can register the same deal?

Some PRMs, like Channeltivity, let you build these conditions into the process with:

• Required fields
• Comments so you can request information from partners to further qualify deals
• Shareable sales assets at each stage of the deal
• History tracking to ensure exclusivity
• Automatic deal expiration

Finally, clearly state how partners receive compensation. 

• Are they getting discounts on purchase prices?
• A flat-rate commission? 
• A percentage bounty?

Edge Cases

You’ll want to think about edge cases, too. Consider the scenario where Partner A registers a deal and gets it approved, but a Fortune 50 prospect wants to work with Partner B. You want the new business, but Partner B is getting price pressure from the prospect because of Partner A’s lower quote and will not win the deal without giving up extra margin.

The whole point of deal registration is to prevent margin erosion, but in this case, it causes partners to lose deals or not make as much money. You also risk losing your channel’s trust if you don’t honor the rules of the deal registration process.

You can resolve this by:

1. Giving all partners the same buy prices, regardless of deal reg status.
2. Giving the partner that owns the approved registration a percent of the deal as a bounty.

In most cases, the deal owner will be the one who closes the opportunity, but in some cases, like the scenario above, Partner B will close the deal, and Partner A will get the bounty. You’ll want to make the bounty percentage big enough to be meaningful but not so big that it’ll provide enough of a price difference to discourage the prospect from not moving forward at all.

If you don’t give additional discounts on a case-by-case basis to help close deals (or keep them small), this should keep everyone happy.

Internal Conflict

The best way to avoid internal conflict is to prevent sales reps from approving or denying deal registrations. 

But it’s important to think through all possible scenarios:

• What if they reach out to a prospect at the same time a partner does?
• Will they get compensated if they consult on a partner’s deal and push it along? 
• Do they know what each partner offers? Or when to bring them into a deal?
• What if they go to a partner event and meet a prospect there? Will they get full credit for the deal, or will the partner get some, too?

“Direct conflict is really common, so try to address that right away,” Courtney suggests. “Align internal sales goals to your channel plans. Bake comp neutrality into your program to rid the team of any incentive to go direct.”

Work with sales leaders to disseminate internal rules of engagement at sales all-hands meetings, during new sales hire training, or monthly syncs.

Lead Distribution Rules

You may not associate lead distribution with channel conflict, but it can happen.

“I knew of a situation where the sales rep at a company had a great relationship with a specific partner and sent all leads their way,” Raegan shares. 

”Eventually, the company found out, and the employee was fired. While the rep shouldn’t have been doing that, the company also shouldn’t have opened the door to that kind of conflict.”

Sidestep these situations by:

• Explaining how you prioritize and distribute, whether it’s by partner tier, size, focus, location, or seniority. 
• Setting response times, deal progression tracking, and any geographic or vertical restrictions are important to note as well.
• Disallowing non-partner team members from distributing partner leads.
• Including a crystal clear lead redistribution policy.

Referral Rules

Referrals can spur channel conflict, too. Note:

• What makes a qualified referral — maybe it’s only new prospects, or you have other specific qualification criteria.
• How the partner will be compensated and when.

Exceptions to the Rules

99% of the time, you want to be enforcing your rules of engagement. Sticking to your rules is how you build trust with your partners. But there may be some very select few instances where you compromise.

Stacy pointed out that your partners may be able to sell into the same account, just in different places. Take the Air Force or other government organizations. Those are huge entities. If one partner has influence in one area of the org and another partner has established influence in another, they might still be able to pursue their own deals. Just make sure you keep the lines of communication open so that the two partners don’t eventually overlap.

How to Resolve Channel Conflict

There’s no way to completely eliminate channel conflict — even if you take every step listed above.

And though conflict can be tricky, it’s important to tackle it head-on. Per Morten: “Partner managers need to address the problem right away, otherwise it will grow bigger. Act as the mediator and try to find win-win scenarios.”

So, how do you do that?

Reference Rules of Engagement

Create a timeline of events to help you sort out (1) what, exactly, has taken place and (2) what your rules allow and don’t allow for.

If you’re using channel management software, this process becomes much easier. You’ve got timestamps for when information was created, updated, submitted, and who took those actions. And if you’re dealing with internal vertical conflict, you can cross-reference this data with what’s in Salesforce or HubSpot.

Use Your Empathy Skills

People are putting significant time and effort into partnering with you, so channel conflict can get heated. To come out on the other side with a partner who still trusts you, try to be empathetic in your communication.

Per Courtney, “Tough meetings with your partners can get emotional, even though it’s business. Really listen to your partners’ concerns and focus on I statements, like ‘I hear you,’ to show that you understand where they’re coming from.”

Brainstorm Prior to a Partner Call

The goal of conversations with your partner about channel conflict should be to find a good next step. While you’ll want to get your partner’s take on a situation and how they think it can be resolved, you should come to the table with two to three solutions.

To get yourself in that mindset, Raegan suggests asking yourself and your team, ‘How can I create winners here?’ “The goal is to make everyone feel good about a bad situation,” she says.

Maybe you pay them a referral fee or compensate the partner some other way for the work they’ve already done. Coming into the call with ideas shows you’re willing to put in the leg work and allows you to propose ideas that you already know are fair to other partners involved.

That said, Morten warns, “Don’t go in with a totally prix fixe solution. You need to really listen to partners and find a way to divide up the pie in a collaborative way.”

Bring a Positive Attitude

As noted above, conversations can be intense. So take a deep breath and focus on actionable ways to get through this. Handle the conflict well, and you may form an even stronger bond with that partner and do more business in the future.

Trish advises, “Use conflict as a learning opportunity for you and or your team to do better.  Document what happened and discuss how this can be avoided in the future.”

Emphasize Customer Success

Ultimately, the success of partners and vendors is dependent on customer success and satisfaction. Framing channel conflict discussions around the customer and what’s best for them can help partners understand how they fit into the bigger picture and keep the focus on driving the best outcomes for everyone.

Rob Stevenson, founder of BackupVault, experienced horizontal channel conflict when multiple service providers began offering overlapping solutions to his company’s clients. Besides defining clear roles and responsibilities for each provider, he met face to face.

“Joint meetings with all partners helped us discuss client needs, align all of our offerings, and ensure partners understood how to position their services effectively. A shared vision reduced conflict and allowed us to provide more value to our customers.”

Be ‘Good to Work With’

Channel conflict isn’t always a bad thing. It can be a way to surface gaps in your program guidelines, and it’s an indicator of a growing partner program. Without highly engaged partners working deals, conflict wouldn’t happen. Plus, it’s an opportunity to build trust with your partners and keep them driving revenue in the long term.

As Trish says, “Being a partner means you win and lose together. By establishing clear boundaries, having open conversations, and outlining terms and goals for the partnership, you put both parties on a path to success.”

Of course, too much channel conflict, and you’ve got a big problem on your hands. PRM software like Channeltivity helps you strike that balance and be the best vendor you can be to your partners.

Use Channeltivity to:

• Streamline partner recruitment, ensuring you’re not oversaturating your program
• Disseminate information through a Portal Library, customizable home page, and to-partner emails, making it easy for partners to find and follow your program guidelines
• Customize your deal registration, lead distribution, and referral processes with built-in requirements and automate the governance of program rules with automatic expiration
• Put partner goals in writing so you can reference them later
• Measure real-time partner progress

Want to give it a whirl? Sign up for a demo to see all these features in action.