IDEAS home Printed from
   My bibliography  Save this article

Managing Channel Profits


  • Abel P. Jeuland

    (Graduate School of Business, University of Chicago, 1101 East 58th Street, Chicago, Illinois 60637)

  • Steven M. Shugan

    (Graduate School of Business, University of Chicago, 1101 East 58th Street, Chicago, Illinois 60637)


A channel of distribution consists of different channel members each having his own decision variables. However, each channel member's decisions do affect the other channel members' profits and, as a consequence, actions. A lack of coordination of these decisions can lead to undesirable consequences. For example, in the simple manufacturer-retailer-consumer channel, uncoordinated and independent channel members' decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated. In addition, the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer. This paper explores the problems inherent in channel coordination. We address the following questions. —What is the effect of channel coordination? —What causes a lack of coordination in the channel? —How difficult is it to achieve channel coordination? —What mechanisms exist which can achieve channel coordination? —What are the strengths and weaknesses of these mechanism? —What is the role of nonprice variables (e.g., manufacturer advertising, retailer shelf-space) in coordination? —Does the lack of coordination affect normative implications from in-store experimentation? —Can quantity discounts be a coordination mechanism? —Are some marketing practices actually disguised quantity discounts? We review the literature and present a simple formulation illustrating the roots of the coordination problem. We then derive the form of the quantity discount schedule that results in optimum channel profits.

Suggested Citation

  • Abel P. Jeuland & Steven M. Shugan, 1983. "Managing Channel Profits," Marketing Science, INFORMS, vol. 2(3), pages 239-272.
  • Handle: RePEc:inm:ormksc:v:2:y:1983:i:3:p:239-272

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    distribution; profitability; margins; coordination;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:2:y:1983:i:3:p:239-272. 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). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.