Channel conflict and coordination Flashcards
- According to Sa Vinhas and Anderson (2005), why and when it is possible (into a B2B context) to use concurrent channels?
A concurrent channel strategy can lead to conflicts due to intertype competition. Conflicts should be avoided and for that reason, a concurrent channel strategy is not always possible.
In a growing market, intertype competition is less severe. Channels can focus on finding new customers instead of “stealing” each other’s customers.
If a customer varies its buying behaviour for the same product over purchasing occasions, the customer does not belong to merely one segment. The customer can contact multiple channels and, as such, puts the channel types in direct competition. Therefore, a consistent buying behaviour is desirable.
Group purchases are a threat for a concurrent channel strategy. Group buyers then use their buying power to augment competition between different suppliers and channel types.
For standardized brands, customers compare suppliers and different channel types. However, the channels can merely compete on prices and services when offering standardized products. Therefore, competition increases. For that reason, a concurrent channel strategy is only appropriate for brands and products that customers perceive as differentiated.
- Based on Guan et al.’s (2019) paper, when it comes to deciding the Wholesale price and the Retail price of a specific good, manufacturers and retailers can face an Upfront Market Research (UMR) scenario by deciding first to perform Market Research and then Quality Advertising, to close the information gaps linked to price setting. On the other hand, manufacturers and retailers can directly develop Quality Advertising, and subsequently engage in Market Research, configuring an Upfront Quality Advertising (UQA) scenario. The authors argue that “retailers are always better off in the UQA than the UMR scenario while the manufacturer can find either UMR or UQA decision sequence more beneficial.” How can this happen? Explain for both the cases of manufacturers and retailers.
So, the actual definitions for the two UMR and UQA scenarios are given in the question. Besides, the student’s paper literally says:
· Channel conflict could arise from asymmetric information between manufacturers and retailers.
· Generally, retailers are better informed about consumers’ preferences, while manufacturers know more about their products’ features and quality.
Consequently, the real question here is to what extent retailers should perform UQA first and then UMR. If the retailer goes for doing UMR, they will need to face research cost to reveal consumers’ preferences and then set their quality advertising level and, thus, prices. This input is also useful for manufacturers, with (near) zero cost for them. On the other hand, when retailers do UQA first, they just need to advertise the quality they feel comfortable with, based on the manufacturer’s specific quality advertising level. Thus, retailers are always better off by postponing their market research decision until they see the manufacturer’s decision on quality advertising, allowing them to make a more precise assessment of the product quality.
