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In-Store Media and Distribution Channel Coordination

Author Info

Listed author(s):
  • 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.

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File URL: http://dx.doi.org/10.1287/mksc.1080.0483
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Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 29 (2010)
Issue (Month): 1 (01-02)
Pages: 94-107

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Handle: RePEc:inm:ormksc:v:29:y:2010:i:1:p:94-107
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Keywords: in-store media; advertising; distribution channel; channel coordination; retailing;

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  1. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 63-81.
  2. Yong Liu & Daniel S. Putler & Charles B. Weinberg, 2004. "Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters," Marketing Science, INFORMS, vol. 23(1), pages 120-133, July.
  3. Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
  4. Anne T. Coughlan, 1985. "Competition and Cooperation in Marketing Channel Choice: Theory and Application," Marketing Science, INFORMS, vol. 4(2), pages 110-129.
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  7. Rajiv Lal, 1990. "Improving Channel Coordination Through Franchising," Marketing Science, INFORMS, vol. 9(4), pages 299-318.
  8. Eitan Gerstner & James D. Hess, 1995. "Pull Promotions and Channel Coordination," Marketing Science, INFORMS, vol. 14(1), pages 43-60.
  9. Jagmohan Raju & Z. John Zhang, 2005. "Channel Coordination in the Presence of a Dominant Retailer," Marketing Science, INFORMS, vol. 24(2), pages 254-262, February.
  10. Anthony Dukes & Esther Gal–Or, 2003. "Negotiations and Exclusivity Contracts for Advertising," Marketing Science, INFORMS, vol. 22(2), pages 222-245, November.
  11. Vrinda Kadiyali & Pradeep Chintagunta & Naufel Vilcassim, 2000. "Manufacturer-Retailer Channel Interactions and Implications for Channel Power: An Empirical Investigation of Pricing in a Local Market," Marketing Science, INFORMS, vol. 19(2), pages 127-148, September.
  12. David Godes & Elie Ofek & Miklos Sarvary, 2009. "Content vs. Advertising: The Impact of Competition on Media Firm Strategy," Marketing Science, INFORMS, vol. 28(1), pages 20-35, 01-02.
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Cited by:

  1. Gangshu (George) Cai & Yue Dai & Sean X. Zhou, 2012. "Exclusive Channels and Revenue Sharing in a Complementary Goods Market," Marketing Science, INFORMS, vol. 31(1), pages 172-187, January.
  2. Cellini, Roberto & Cuccia, Tiziana, 2014. "The artist–art dealer relationship as a marketing channel," Research in Economics, Elsevier, vol. 68(1), pages 57-69.
  3. Goering, Gregory E., 2012. "Corporate social responsibility and marketing channel coordination," Research in Economics, Elsevier, vol. 66(2), pages 142-148.
  4. Dmitri Kuksov & Kangkang Wang, 2013. "A Model of the "It" Products in Fashion," Marketing Science, INFORMS, vol. 32(1), pages 51-69, July.

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