The Price of Launching a New Product: Empirical Evidence on Factors Affecting the Relative Magnitude of Slotting Allowances
Slotting allowances are a relatively recent trend, particular to the retail food industry. These allowances are lump-sum, up-front transfer payments from manufacturer to retailer when the manufacturer launches a new product. The practice has attracted some scrutiny because of uncertainty about its purposes and consequences. We draw from the extant literature to identify factors that potentially influence the relative magnitude of slotting allowances. Based on analysis of primary survey data from retailers and manufacturers, we observe that charging and paying of slotting allowances are affected by the relative strength of the players. Among retailers, the relative magnitude of slotting fees increases with retailers' informational advantage over the manufacturer about the likely success of the new product, even when retailers recognize that the product is likely to be successful. Additionally, and consistent with the first finding, retailers with lower costs (i.e., potentially more efficient and powerful retailers) received higher slotting allowances. Furthermore, retailers charge higher slotting fees, even when concerns about manufacturers' fulfilling postlaunch advertising commitments are minimal, implying that relatively powerless manufacturers are asked to provide credible commitments regarding postlaunch activitiesare asked to pay relatively high slotting fees. Among manufacturers, the relative magnitude of slotting fees paid is lower for those who have a strong market share position. We discuss the theoretical, managerial, and public policy implications of our findings.
Volume (Year): 22 (2003)
Issue (Month): 2 (January)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:22:y:2003:i:2:p:246-268. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.