Manufacturers today sell their products through a dizzying array of channels, from Wal-Mart to the World Wide Web and everywhere in between. Since most manufacturers sell through several channels simultaneously, channels sometimes find themselves competing to reach the same set of customers. When this happens, channel conflict is virtually guaranteed. Such conflict almost invariably finds its way back to the manufacturer.

Conflict comes in many forms. Some is innocuous—merely the necessary friction of a competitive business environment. Some is actually positive for the manufacturer, forcing out-of-date or uneconomic players to adapt or perish. But some is truly dangerous, capable of undermining the economics of even the best product.

Dangerous conflict generally occurs when one channel targets customer segments already served by an existing channel. This leads to such a deterioration of channel economics that the threatened channel either retaliates against the manufacturer or simply stops selling its product. In either case, the manufacturer suffers.

The stakes can be high. Consider a few examples from the United States. Hill’s Science Diet pet food lost a great deal of support in pet shops and feed stores as a result of the company’s experiments with a "store within a store" pet shop...