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In-Store Media and Distribution Channel Coordination

Author

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  • Anthony Dukes

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Yunchuan Liu

    (College of Business, University of Illinois at Urbana-Champaign, Champaign, Illinois 61820)

Abstract

We study the effects of retailer in-store media on distribution channel relationships. Retailers open in-store media (ISM) and allow manufacturers to advertise to shoppers. Our results suggest that ISM has an important role in coordinating a distribution channel on advertising volume and product sales, and on mitigating supplier competition. Improved channel coordination is achieved through the internalization of advertising decisions from commercial forms of media (e.g., radio, TV, newspaper). A retailer may strategically subsidize manufacturers for their advertising on ISM. This subsidy is optimal even if ISM is more effective than commercial media. With manufacturer competition, a retailer can strategically use a “competitive premium” to ration excessive advertising between competing suppliers in a category. When manufacturers are asymmetric with preadvertising brand awareness, a retailer has an incentive to price discriminate by charging lower prices to manufacturers whose brand awareness is higher.

Suggested Citation

  • Anthony Dukes & Yunchuan Liu, 2010. "In-Store Media and Distribution Channel Coordination," Marketing Science, INFORMS, vol. 29(1), pages 94-107, 01-02.
    • Handle: RePEc:inm:ormksc:v:29:y:2010:i:1:p:94-107
    DOI: 10.1287/mksc.1080.0483
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    References listed on IDEAS

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