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CHANNELS RESEARCH: A STATE OF THE ART ASSESSMENT By Gary L. Frazier* January 2018*Gary L. Frazier is the Richard and Jarda Hurd Professor of Distribution Management in the Marshall School of Business at the University of Southern California, Los Angeles. CHANNELS RESEARCH: A STATE OF THE ART ASSESMENT ABSTRACTDuring the past two decades, channels research has been quite distinct in nature compared to channels research in the 1970s through the late 1990s. There is both good and bad in this comparison. Significant strides have been made in how competitive strategy, end-customer behavior, and marketing strategy interact with channel management. Research on channel organization has also advanced to some degree. However, behavioral channels research is largely at a stand-still. Biases exist in the marketing discipline that serve to impede advances in channels research. The purpose of this article is to provide a perspective on the current status of channels research and how we should proceed in the future to promote the most progress for both the marketing discipline and practicing managers. It is hoped the article will shape the direction of marketing thought on channels of distribution and its fundamental domain.Channels of distribution are pathways or pipelines of firms (e.g., suppliers, distributors, sales representative firms, retail stores, web-sites) that facilitate the movement of goods and services from points of production-origin to points of sale with end-customers (Levy and Weitz 2009). Sales transactions of products and services with end-customers are consummated in channels of distribution. Some channels are integrated or company-owned (i.e., direct channels), while many more channels are non-integrated or independently-owned (i.e., indirect channels). The over-arching goals, competitive strategy, targeted end-customers, and marketing strategy of the firm should impact channel management and vice versa. Moreover, how channels are organized and then governed and managed on a day to day basis are fundamental issues to this area of research. The current status of channels research is exciting, but at the same time somewhat troubling. We have made tremendous strides over the past two decades in understanding how the firm’s competitive strategy, targeted end-customers, and marketing strategy interact with channel management decisions. However, research on channel organization has been slow to advance and behavioral channels research has languished to a regrettable degree. Biases in the composition of marketing faculty at the top business schools, backgrounds and research preferences of marketing Ph.D. students, and research methods exist in our discipline that impact what marketing scholars examine to the detriment of channels research. These biases will be addressed more fully later in this article. Hopefully such biases can be corrected in the near future.Frazier (1999) provides a capable review of channels research from the early 1970s to the late 1990s, while outlining future research needs. The purpose of this article is to examine channels research over the past two decades and provide a perspective on how it should proceed to promote the most progress. Accordingly, future research needs are stressed throughout the article. There is much research to be done, which requires more marketing faculty of diverse talents being attracted to the channels area.In this review, channels research was classified as belonging to various categories. The categories are distinct, reflecting the truly diverse nature of channels research.Institutional Environment and PlaceGrewal and Dharwadkar (2002) highlight the importance of a legitimacy-based institutional environment approach in marketing channels. The primacy of regulatory institutions (e.g., laws, public policy), normative institutions (e.g., professions, professional associations, trade associations), and cognitive institutions (e.g., invisible and habitual aspects of social reality) in impacting the legitimacy of channel members is centered upon in their theoretical article. Grewal and Dharwadkar (2002, p. 83) state, “… the institutional aspects of the external polity have not been accorded their due importance in research.” In a related vein, Yang et al. (2012) examine how firms doing business in foreign markets are challenged by the managerial dilemma of how to gain legitimacy or social acceptance while safe guarding efficiency within their channels. They find that institutional distance (i.e., regulatory, normative, and cultural-cognitive differences) leads to firms’ perceptions of legitimacy pressure and market ambiguity, which in turn invoke firm governance choices to safeguard performance. Their empirical results suggest that contract customization and relational governance (i.e., the development and maintenance of norms in interfirm channel relationships) can be used to gain both social acceptance and efficiency.How direct (authoritative orders) and indirect (rigorous rules and regulations) constraints from governments, codes of conduct within professions, and habitual routines impact firm legitimacy and channel management across countries and regions are clearly worthy of more exploration in empirical studies. Governance choices by individual firms need to be examined as well as highlighted by Yang et al. (2012).Network Effects and PlaceAntia and Frazier (2001) explore the severity of enforcement when violations of explicit contracts take place. In dense interfirm networks where frequent communications exist among channel members and where the violating channel member has a central (influential) role in the network, a less severe enforcement response is taken by the firm. A lessening of potential retaliation by members of the network is argued to be the primary reason behind such an enforcement approach.Wathne and Heide (2004) examine how a firm’s ability to build flexibility into a dyadic relationship may depend on how governance is conducted in other connected relationships in the larger supply chain. Empirical results indicate that individual channel relationships in a larger network are connected and that the firm’s ability to adapt to uncertainty in one relationship depends in part on how it deploys particular governance mechanisms (supplier qualification and hostages) in other inter-firm relationships.Over-Arching Goals and PlaceHow top management decides on the primary goals of the corporation is clearly important in structuring and managing all aspects of the organization (Day 1994). The same goal or goals may not be established across all of a corporation’s geographic regions, product-markets, and strategic-business-units, making the examination of over-arching goals difficult and complex.Research linking corporate goals to channel management is lacking at the present time. This is unfortunate considering that corporate goals are likely to have tremendous impact on both channel organization and the management of day-to-day relationships and operations in the channel. Among the most important corporate goals appear to be brand equity, sales growth, and profitability. Brand equity is a set of assets and liabilities linked to a brand (i.e., its name and symbol) which add or subtract from the value provided by the firm’s products and services to the firm, its channel members, and end-customers (Aaker 2009). For some firms, brand-building efforts to enhance brand equity appear to be emphasized. Clearly, the channel experiences of end-customers influence their perceptions of a firm’s brand positioning and image. Sales growth is a major goal for most companies, especially public ones, and likely optimized when multiple channels of all types and forms are utilized by suppliers (Neslin et al. 2006; Sharma and Mehrotra 2007). Achieving both brand equity and sales growth at the same time appears challenging, with inherent trade-offs involved in achieving each goal. For example, a major retail shift recently compelled Nike to authorize to sell its sneakers and athletic clothing. is known for facilitating sales transactions rather than achieving brand building for associated suppliers. While Nike could not ignore , in part because its major competitors are closely aligned with the giant e-commerce site and major brick and mortar retailers have failed (e.g., Sports Authority), how long-term performance for the firm is affected remains to be seen. Support of the Nike brand in other of its channels may be in some jeopardy. Profitability, whether gross margin or net profit margin, represents another important corporate goal for many organizations. When short-term profitability is the main goal, the firm is likely to focus on fewer channels, attempt to enhance product-service pricing and channel support of the brand, and reduce costs. At any juncture, profitability could be sacrificed for enhanced brand equity and/or sales growth, with channel organization and management most likely impacted. Thus how corporate goals are set, their priority across different contexts, and their impact on channel organization and management are clearly deserving of research attention in the petitive Strategy and PlaceThe examination of a firm’s competitive strategy and how it influences the organization and management of channels has not been emphasized in channels research. However, three recent studies have shed light on some important competitive issues. Luo et al. (2007) propose a method based on combining conjoint analysis with game theory that estimates how a powerful retailer and competing manufacturers will react to the specific new product concepts of a focal manufacturer, and whether the retailer would find a given concept acceptable. The proposed method seems promising. Geylani et al. (2007) present analytic results indicating that hard-pressed manufacturers and non-dominant retailers have an incentive to mitigate the power of dominant retailers through joint marketing initiatives with one another (e.g., promotions and advertising). Based largely on the number of outlets in a market, Nishida (2017) finds that first entrants have a positive market share advantage over later entrants. “By entering new markets earlier than its competitors, a firm may increase the total sales from the market via a higher number of outlets” (Nishia 2017, p. 591). If a product or service is less accessible because of increased search costs or transportation costs, end-customers could be less likely to purchase it. While this study focused on convenience store retailers in Japan, it appears relevant for any type of organization.Obviously there is much left to examine. Competitive strategy relating to target market selection, the product-service portfolio, brand positioning, value propositions (i.e., why targeted customers buy the product or service), pricing, and promotion is likely to impact channel management and must be explored. More specifically, four constructs need attention in future channels research relating to competitive strategy. Online sales are increasing dramatically in many product-service categories and disrupting the business of embedded brick-and-mortar retailers, leading to either failure (e.g., Sports Authority, American Apparel) or a serious decline in sales and profit performance (i.e., Macys). Competitor presence in untapped channels is the degree to which competitors distribute through channels not currently utilized by focal manufacturers. Competitors may have entrenched in these untapped channels, leading to lost sales and reduced market share for the firm. Unauthorized sales in untapped channels are rapidly increasing. Many third party re-sellers exist that acquire a manufacturer’s products through various means (e.g., supplier websites, close-out merchandize by failed retail chains) and resell them, even though they are not authorized to do so. Finally, a competitive disequilibrium in an industry results whenever a major change or shock alters the market share positions of suppliers and intermediaries, whether positively or negatively. It could exist for many reasons, including a major merger, a major acquisition, a major cost reduction, the presence of a new technology, the introduction of a continuous or discontinuous innovation, a product-service problem, non-traditional behavior by an emerging market segment, or a major change in resource commitment, strategy, and implementation by a key industry player. A competitive disequilibrium is likely to alter the communications and plans of suppliers with associated channel members. Clearly, how these constructs and associated trends impact channel management from a competitive strategy perspective represents another major research thrust that is much needed in this area of research.Consumer Behavior and PlaceThree key entities are involved in every marketing channel and related sales transactions: manufacturers, intermediaries, and end-customers (Palmatier et al. 2015). This premise has long been accepted. However, the “commercial channel,” consisting of manufacturers and intermediaries, has been the primary focus of channels research, with end-customers generally being ignored. Fortunately, recent channels research has remedied this limitation to some degree.Several studies have focused on the multichannel shopping behavior of consumers. Venkatesan et al. (2007) provide evidence that multichannel shopping is associated with higher customer profitability. They argue that providing a multichannel experience to customers has the potential to improve two critical aspects of customer relationship management: customer retention and customer growth. Customers who shop in multiple channels are exposed to more services provided by the firm and may be more satisfied and develop a deeper relationship with the firm as a result (also see Neslin and Shankar 2009).However, results in Kushwaha and Shankar (2013) suggest a more nuanced approach is necessary. They find that multichannel customers are the most valuable segment only for hedonic product categories (i.e., characterized by pleasure and luxury as a lifestyle) because they are likely to evoke impulse purchase and variety-seeking behaviors. Traditional channel customers of low-risk product categories appear to provide higher monetary value than other customers. Moreover, for utilitarian product categories perceived as high (low) risk, web-only (catalog- or store-only) shoppers represent the most valuable segment. Montagutti et al. (2016) argue that the multichannel profitability relationship is actionable. That is, they find that a properly designed marketing campaign can increase both the number of multichannel customers and average customer profitability. However, results in Valentini et al. (2011) appear to temper such a conclusion to some degree. This study finds that customers evolve in their choice of channels over time, with newer customers being more responsive to marketing efforts aimed at motivating them to try new channels whereas more mature customers are resistant to such efforts. Thus action-ability may not apply to all customer groups.Inman et al. (2004) explore channel patronage behavior by consumers. They find that channel-category associations at the product level and geodemographic factors impact consumer shopping behavior. For example, tobacco, alcohol, candy, magazines, and soaps are perceived as closest to the drug store channel, while cleaning supplies, automotive, gifts, beauty care, miscellaneous household items, and paper goods are most closely related to the mass merchandizer channel. Drug channel share of volume tends to be driven by older, more urban households without children, and mass merchandizer share of volume is driven by younger, less affluent, and nonurban households without children.Chintagunta et al. (2012) find that consumer transaction costs for grocery shopping (e.g., travel time and transportation costs, in-store shopping time, item-picking costs, basket-carrying costs, quality inspection costs, inconvenience costs) can be sizable and play an important role in the choice between purchasing in online and off-line channels. “Transaction costs vary from trip to trip and differ across households” (Chintagunta et al. 2012, p. 96).Importantly, results in Ansari et al. (2008) indicate there may be limits to the benefits of multichannel shopping for individual firms. Analyzing data from a retailer that markets over the Web and through catalogs, Ansari et al. (2008) find a negative long-term association between consumer Internet usage and sales, and limited loyalty effects for purchases made on the Internet. Migration to the Internet may lower switching costs, making it easier for consumers to compare products across firms.Sa Vinhas and Heide (2015) examine the association of intra-brand competition and customer satisfaction. In sales territories where manufacturer sales branches and distributors co-exist, intra-brand competition can have potential benefits for business-to-business customers. At low levels of competition for customers and channel functions, increases in competition appear to enhance end customer satisfaction, while at high levels of competition, increases in competition appear to reduce end customer satisfaction. In addition, manufacturer attempts to create vertical separation between the dual channels limits competition and may reduce end-customer satisfaction. Ahmadi and Yang (2000) examine how different segments of consumers are likely to react to parallel importation. One segment of consumers may stay with the authorized version of the product because they place more value on the warranty and services than on price. Another customer segment may switch to the parallel import because a lower price is offered. A third customer segment may purchase the parallel import because of enhanced awareness of the offering.Finally, Kashyap and Murtha (2017) examine two types of compliance gained by franchisors in franchisee relationships, perfunctory compliance (i.e., the extent to which a franchisee adheres to what is formally required in the franchise contract) and consummate compliance (i.e., franchisee effort beyond contractual requirements). They find that perfunctory compliance is inversely related to end-customer satisfaction with their hotel experience, while consummate compliance is positively related to customer satisfaction. Thus the routes suppliers or franchisors decide take in gaining compliance with downstream channel members may impact how end-customers react to the services offered in the channel. This is a highly important finding; allowing some flexibility to intermediaries in specializing their services to particular customers could reap significant benefits to all involved.In any case, multichannel customer management is clearly a pivotal component of marketing strategy for many firms, especially as the “omni-channel concept” becomes increasingly important. An omni-channel reflects a type of multi-channel structure (e.g., online, catalog, phone, physical stores) where a firm attempts to integrate and coordinate across separable channels to provide a seamless and consistent customer experience. Thus multichannel shopping behavior and related outcomes need further study. Future research should continue to examine the contingent nature of multichannel shopping as illustrated by Kushwaha and Shankar (2013) and the responsiveness of different end-customer groups to multichannel marketing efforts as exemplified by Valentini et al. (2011). When omni-channel implementation is effective, the impact on end-customer behavior needs to be examined.The primary unexplored research issue, however, is what are end-customers looking for in channels of distribution when they buy products and services. Inman et al (2004) shed light on this issue, but it must be explored much more deeply, especially at the brand and segment levels. End-customers can gain product and service information through Internet searches on Google, , and other sources, including social networks (e.g., Facebook) and blogs. Thus product and service information at point of sale may be less needed today. If true, this has tremendous implications for channel management. Information exchange between suppliers and channel members may be less important. The effectiveness of intermediary salespeople may be a minor concern in many product-service contexts. Relational exchange between suppliers and channel members where social norms of solidarity, mutuality, flexibility, and information exchange are strongly established at a high cost may be limited in actual benefits. In many product markets, channels of distribution may provide product-service availability, but little else to informed end-customers. Such possibilities need to be explored.Product and PlaceA number of studies based on analytical models and game theory examine trade-offs between a centralized channel (i.e., where the manufacturer owns the channel) and a decentralized channel (with an independent retailer is involved). Villas-Boas (1998) studies the effects of channel structure on the optimal design of the product line. He finds that a manufacturer may offer products that are more differentiated from each other in a decentralized channel compared to a centralized channel. Liu and Cui (2010) examine the length of a manufacturer’s product line. They show that a manufacturer may benefit from providing a longer product line in a decentralized channel since it allows the manufacturer to enhance market coverage and better match its products with individual consumer tastes. Jerath et al. (2017) find that product quality can be higher in a decentralized channel compared to a centralized channel because a wholesale price contract shields the manufacturer from inventory risk. In addition, their model indicates that when dealing with high demand uncertainty, quality can be a more effective lever than inventory in a centralized channel; however, in a decentralized channel, quality is less responsive and inventory is more responsive to demand uncertainty.Three studies focus on new product introductions in channels of distribution. Desai’s (2000) analytical model indicates that retailers are likely to place a greater emphasis on slotting allowances than on advertising in their decisions to accept a new product when stocking costs are high, where manufacturer advertising plays a limited role in the market, and in highly competitive markets. Dean et al. (2016) find that manufacturers craft increasingly specific contract terms as new product creativity increases, frequency of new product introductions increases, and performance ambiguity is high. Further, under the condition of high contract specificity, the retailer’s relational behaviors increase (decrease) over a contract’s duration when the new product is successful (unsuccessful). Tracey et al. (2014) argue that regional clusters, project governance, and new product outcomes are all interrelated. Increasingly, the firm’s new product initiatives involve external parties such as suppliers and resellers. That is, the context in which governance mechanisms are deployed is important. Dense clusters appear to promote relational governance whereas centralized clusters may give rise to hierarchical governance.Wang (2004)McGuire and Staelin (2008) Bhaskaran and Gilbert (2009) examine how product durability affects the interactions between a manufacturer and its dealers. If the manufacturer sells the product to the dealers, then the dealers can either sell or lease them to final consumers. As either the number of dealers or the substitutability among them increases, the manufacturter should rely more on lease brokering than product sales to end-consumers.Bhargava (2012)Liu and Cui (2010)Shulman et al. (2010) examine optimal channel structure for returns of non-defective products. Consumers learn after purchase the product does not match their preferences as well as desired. Employing an analytical model of a bilateral monopoly, a return penalty is affected by whether returns are salvaged by the manufacturer or the retailer. Restocking fees. The return penalty may be more severe when returns are salvaged by a channel member who derives greater value from the returned unit. The manufacturer may earn greater profit by accepting returns even if the retailer has a more efficient outlet for salvaging unts. Iyer and Villas-Boas (2003) prove that the manufacturer is less lkely to offer a return policy for overstock returns when the retailer has greater bargaining power.Steenkamp and Geyskens (2014) examine factors impacting the growth of store brands at the expense of manufacturer national brands in different countries around the world. They show that two levers retailers can use as part of a globally integrated strategy to increase store brand success are copycatting NB packaging and closing the quality gap with NBs. Three marketing weapons retailers can use as part of a worldwide learning strategy are managing the price gap with NBs, enhanced availability of SB through distribution practices, and retail concentration in the product category. Ray et al. (2016) study value-added resellers’ (VARs) assortments of multicomponent products from different suppliers (i.e., mixed systems with interchangeable parts). Suppliers retain discretion about mixed systems. Intermediaries add mixed systems selectively to improve their own upstream terms relative to softer upstream price competition that benefits producers. Not all feasible mixed systems with positive consumer demand will be offered. Moreover, a common VAR intensifies producer competition through the leverage it gains by adding limited mixed systemsDahlquist and Griffith (2014)Gooner et al. (2011)Amaldoss and Shin (2015)Wuyts et al. (2004)Bhargava (2012) examines retailer-driven product bundling in a distribution channel where a downstream retailer combines component goods produced by separate manufacturers on its own. The study finds that channel conflicts weaken the case for retailer-driven product bundling. The culprit is a combination of vertical channel conflict (incentive misalignment with respect to bundle versus component sales) and horizontal conflict (each manufacturer wants a higher share of the profits from bundle sales). They cause the manufacturer to overprice component goods, weaknening the retsiler’s incentive to bundle.Price and PlaceKadiyali, Chintagunta, and Vilcassim (2000)Srivastava, Chakravarti, and Rapoport (2000)Sudhir (2001)Banks et al (2002)Raju and Zhang (2005)Liu and Zhang (2006) examine the benefits of personalized pricing in distribution channels, that is, varied pricing dictated by demands of individual consumers. They find that the retailer is generally worse off from personalized pricing because the manufacturer can adjust its wholesale pricing accordingly. However, in circumstances where personalized pricing by the retailer deters the manufacturer from implementing a direct online channel with its own personalized pricing, the retailer may be better off financially.Ray et al. (2006) explore asymmetric wholesale pricing. They find that retailers will not adjust prices for small changes in their costs. In contrast, when large changes in costs are encountered, retailers will alter prices to consumers. Thus a small wholesale price increase is more profitable because manufacturers will not lose customers from higher retail prices. However, a small decrease in wholesale prices is less profitable because it will not lower retail prices. For larger changes in wholesale prices, this asymmetry in pricing behavior vanishes as price adjustments are made by retailers.Geylani et al. (2007)Gal-Or et al. (2008) examine pricing and information sharing in a channel between a manufacturer and partially informed retailers. Their research suggests that a manufacturer might reap larger benefits from sharing witthe more porrly informed retailers. Ozturk et al. (2016) examine the effects of a firm’s local channel exits on prices charged by incumbents remaining in the marketplace. Based on an examination of new car price reactions by automobile dealers who experience the exit of a Chrysler or Pontiac dealership in their markets, an average price increase of 1.006% is found following the departure. The price increase is lower at dealerships more proximate to the existing dealer than dealerships farther away.Sotgiu and Gielens (2015)Dukes et al. (2006)Cui and Mallucci (20160Trade Promotions and PlaceKumar et al. (2001)Moorthy (2005)Nijs et al. (2010) assemble a unique data set containing information on prices, quantities, and promotions throughout an entire channel in a product category. examine manufacturer trade promotions and associated channel pass-through. The authors demonstrate how manufacturers and wholesalers can avoid unprofitable trade deals for specific products and retailers by utilizing estimates of pass-through, consumer price elasticity, and margins. Compared to an inclusive policy where the manufacturer offers all retailers the same trade deal on all products, a selective trade promotion strategy improves both deal profitability and reduces associated costs.Desai et al. (2010)Sudhir and Rao (2006)Marketing Communication and PlaceShaffer and Zettelmeyer (2004)Dukes and Liu (2010) indicate that many retailers are offering in store media for their customers (e.g., product ads on television screens). Their game-analytic model indicates that retailers can use in store media to help coordinate relationships with manufacturers on advertising volume, product sales, and mitigating competition. In addition, the model indicates that retailers have an incentive to change higher advertising rates to manufacturers with low pre-awareness levels on their products.Physical Distribution and PlaceIyer et al. (2007)Shang et al. (2009) focus on distribution system redesign with a dual emphasis on minimizing total distribution costs and improving customer service levels. They develop a model that determines the optimal number of regional distribution centers (RDCs) for a manufacturer, where the RDCs should be located, which retailer/customer distribution centers should be served by each RDC, and total transportation costs and service level for the optimal scenario (as well as other scenarios).Dong et al. (2015) find that stock-out recovery efforts, such as promoting back-orders and having an effective return policy, can increase both the manufacturer’s and channel profits. Channel IntegrationGhosh and John (1999) develop a governance value analysis approach to better explain variations in channel integration in different industries. They argue that positioning (i.e., the particular bundle of benefits selected by the firm to be created and delivered to targeted customers) and resources (i.e., the scarce and imperfectly mobile skills or assets possessed by the firm) will impact the governance form utilized by the firm, interacting with the exchange attributes emphasized in transaction cost economics (i.e., specialized investments, uncertainty, and performance ambiguity). Ghosh and John (1999) develop the Governance Value Analysis (GVA) framework as applied to Transaction Cost Economics (TCE). Aside from clarifying the importance of value creation in TCE, GVA highlights limitations of TCE in adequately explaining channel choice by firms. Ghosh and John (1999) point out that sharp differences exist between competing firms in the same market on their use of governance form. Specifically, in addition to TCE’s exchange attributes (i.e., specialized investments, environmental uncertainty, and performance ambiguity), variations in firm positioning and possession of resources across firms are likely to shape channel choice decisions as well.Another major reason for the inability of TCE to predict channel choice in many product markets is the existence of a large number of small-sized customers with low average order sizes. Individual suppliers cannot achieve profitability utilizing integrated channels to serve many small customers; selling and physical distribution costs would exceed revenues. Leading to the need to establish non-integrated channels in such cases. Independent channel members can align with multiple suppliers and achieve higher average order sizes with a more advantageous cost structure in profitably serving small customers.Relying on transaction costs economics, Anderson (2008) examines the trade-offs in manufacturers relying on their own company salespeople compared to use of independent manufacturer representative companies. The principal finding is that the greater the difficulty of evaluating a salesperson’s performance, the more likely the firm to substitute surveillance for commission, that is, use a company salesforce. Direct sales forces are also associated with complex, hard-to-learn product lines and with districts that demand considerable non-selling activities.Caldieraro and Coughlan (2007) show that employing an indirect channel of independent sales representatives paid through commission-only payments performs poorly compared to a direct channel of company salespeople because of control issues. However, if incremental sales incentives referred to as spiffs are added, the indirect channel of sales reps can perform close to the direct channel, helping the manufacturer avoid fixed costs and risk.McGuire and Staelin (2008) perform an industry equilibrium analysis of downstream vertical integration. They find that for low degrees of product substitutability, manufacturer will likely distribute their product through company stores. For more highly competitive goods, manufacturers will be more likely to use decentralized distribution systems with an exclusive retailer.Kim et al. (2011)Channel Expansion with Multiple Channels and Distribution Intensity“Today, the use of multiple sales channels has become the rule rather than the exception” (Furst et al. 2017, 59). Geyskens et al. (2002) examine internet channel additions to current channels. They find that market valuation of the firm is generally heightened by the addition of an internet channel. More specifically, powerful firms with few direct channels experience greater gains in financial performance than less powerful firms with a broader direct channel offering. Moreover, in terms of order of entry, early followers appear to possess a competitive advantage over both innovators and later followers.Avery et al. (2012) examine how adding bricks to clicks impact firm performance. In the short-run, they find that the introduction of a retail store decreases sales in a direct catalog channel but not a direct internet channel. In the long-run, sales increase in both alternative channels. “… while the store initially reduces the number of repeat customers purchasing in the direct channels, it brings more first-time customers in at a faster rate and encourages higher numbers of new and repeat customers to purchase in the direct channels over time” (Avery et al. 2012, p. 106). Homburg et al. (2014) examine whether a firm’s announcement of an increase in distribution intensity or the establishment of a new channel influences firm value. Whereas the establishment of a new channel positively influences firm value overall, reactions to an increase in distribution intensity are highly contingent based upon turbulence and competition in the product-markets.Sa Vinhas and Anderson (2005) provide empirical evidence in the B to B context as to when concurrent channels (a direct channel by the manufacturer and indirect channels involving independent intermediaries) exist in the same geography selling the same products. When the market is larger and sales growth is high, customers do not vary their behavior over purchase occasions, customers do not form product buying groups, customers perceive brand offerings as differentiated and product bundling is more prominent, concurrent channels are more likely to exist.Yoo and Lee (2011) find that the impact of Internet channel introduction varies substantially across channel structures and market* environments. Internet channel entry by a retailer does not always lead to lower retail prices and enhanced consumer welfare. Moreover, an independent retailer might become worse off after adding its own Internet outlet if the market is geographically concentrated. A manufacturer is better off with the introduction of an Internet store regardless of the resulting channel structure because of enhanced market coverage.Danaher et al (2010)Homburg et al. (2014) Avery et al. (2012)Huyghe et al. (2017)Furst et al. (2017) center on a company’s division of segment- and task-related responsibilities among multiple sales channels. Segment differentiation (i.e., the degree to which the firm’s channels differ in customers for which they are responsible) tends to reduce horizontal conflict but inhibit cooperation in the MC system, while task differentiation (i.e., the degree to which the firm’s channels differ in customer-related functions for which they are responsible) reduces primarily vertical MC conflict and promotes cooperation in the MC system. Moreover, depending upon customer characteristics, segment differentiation may damage channel relationships overall and limit sales success, while task differentiation unambiguously promotes channel relationships and thus drives company sales success.Several studies have found a convex relationship (the wider the distribution the greater the marginal returns from further distribution) between retail distribution and sales in cross-sectional data (cf. Wilbur and Farris 2014). The evidence further suggests that the links between retail distribution and sales are quantitatively important. Ataman et al. (2010) use rich French data to establish that the sales elasticity with respect to retail distribution (0.74) dwarfs the corresponding elasticity of advertising (0.13). Friberg and Sanctuary (2017) find that widening distribution has a statistically and economically significant effect on volumes sold. Results indicate that sales are a convex function of distribution.Bronnenberg et al. (2000) use data from the U.S. market for ready-to-drink tea to study the positive feedback between sales and distribution. They establish that such feedback shocks are important at early stages of a new product’s life; short-term changes may generate larger long-term changes. Bucklin et al. (2008) use cross-sectional variation in closeness to car retailers for California consumers to establish that dealer accessibility has a strong effect on market share for the respective brand.Kalmins (2004) examines franchisor encroachment when franchisors ass new units of their brand close to their franchisees’ existing untis.Bucklin et al. (2008)Bureaucratic FunctioningGrewal et al (2013)Training ProgramsRecruitmentFunction AllocationPlanningInter-firm PowerKadiyali, Chintagunta, and Vilcassim (2000) attempt to examine the channel power construct based on prior modeling efforts instead of the behavioral literature on power. They conclude manufacturer pricing power, as measured by manufacturer markup, is less than retailer pricing power for each of the major brands in the refrigerated juice and tuna categories. Geylani et al. (2007). Our results indicate that when faced with a dominant retailer who dictates wholesale price terms, hard-pressed manufacturers and nondomina t retailers have an incentive to mitigate the power of the dominant retailer. Joint marketing initiatives (e.g., joint promotions and advertising) with selected channel members can be used as a way to deal with the threat imposed by a power retailer in a particular industry or product category.Draganska et al. (2010)Contract EnforcementAntia and Frazier (2001) explore the severity of enforcement when violations of explicit contracts take place. They find that a relatively severe enforcement response is taken when interdependence magnitude is high, significant specialized investments have been made, and critical obligations have been violated. In contrast, a less severe enforcement response appears taken when agent and network retaliation is a possibility and performance ambiguity is high. Conflict and OpportunismArya and Mittendorf (2006) argue that there can be benefits of channel conflict in the sale of durable goods with a dominant retailer. They show that a manufacturer is better off coordinating a dominant retailer through quantity discounts when the cost of retail services is high, and through a menu of two-part tariffs when the cost is low, or when the retailer is highly dominant. Sa Vinhas and Anderson (2005) examine concurrent channels in the B to B context where direct channels operated by the manufacturer and indirect channel owned by independent intermediaries coexist in the same sales territoroes. They find that the potential for conflict (extent of destructive competition) to be less the more the two channels have differentiated offers, the more the manufacturer double compensates independent channel members, and the more the manufacturer adopts a system that clarifies order ownership.Van der Maelen et al. (2017) examine retailer and manufacturer vulnerability in conflict de-listings. The study investigates market share shifts during a highly publicized conflict in the UK where a major retailer took a major manufacturer’s products off of its shelves, involving multiple brands and categories. Both party’s lost sales, yet the retailer was the most vulnerable party. Both firms lost more in necessity than in impulse product categories. Long term consequences were also examined after the conflict was settled and the retailer took back the manufacturers products; the retailer’s market share recovered to the previous level, whereas the manufacturer’s market share underwent a long-term level rise.Samaha et al. (2011)Antia et al. (2013)Samha et al. (2011) examine perceived unfairness in channel relationships. The study shows that perceived unfairness acts as a relationship poison by directly damaging relationships, aggravating the negative effects of both conflict and opportunism, and undermining the benefits of using contracts to manage channel relationships. Interestingly, at low levels of perceived unfairness, conflict and opportunism have small or even insignificant effects on channel member outcomes.TrustCommitmentPalmatier et al. (2013)Relational ExchangeChannel Communication and Information SharingGal-Or et al. (2008) examine pricing and information sharing in a channel between manufacturer and partially informed retailers. Their research suggests that a manufacturer might reap larger benefits from information sharing with more poorly informed retailers.Frazier et al. (2009) address distributor sharing of external and internal strategic information with associated suppliers. Distributors share higher amounts of both forms of strategic information when dependence asymmetry is in their favor and when each firm’s specialized investments are high. Environmental uncertainty has significant direct and interactive effects only on distributor sharing of internal strategic information. Distributor trust in the supplier facilitates sharing of ISI and high distributor product-market familiarity enhances the sharing of ESI.Jiang et al. (2016) study information sharing in a distribution channel where the manufacturer possesses better demand-forecast information than the downstream retailer. When the retailer is risk-neutral, voluntary sharing and mandatory sharing are equivalent to the firms. However, with a risk-averse retailer, the manufacturer prefers voluntary sharing whereas the retailer prefers mandatory sharing. Furthermore, a more accurate demand forecast benefits both firms under voluntary and mandatory sharing, but may lead to lower profits for both firms under no sharing because of retailer strategic pricing behavior and the manufacturer’s signaling cost.Srivastava and Chakravarti (2009)Heide et al. (2007)Coordination and ControlHughes and Ahearne (2010) explore the energizing force of brand identification on the efforts of intermediary salespeople. Findings indicate that while organizational identification strengthens salesperson adherence to controls, supplier brand identification can increase salesperson effort behind a specific brand, leading to enhanced brand performance. Thus suppliers can exercise influence over reseller sales personnel by strengthening the psychological connection between their brands and the salespeople.Gu et al. (2010) explore how manufacturers can manage distributors’ changing motivations over the course of a joint sales program. While distributors’ ex ante commitment may be driven by their motivation to avoid losses, their ex post adaptation may be driven by rent-seeking motivations. Gu et al. (2010, p. 32) conclude, “… a manufacturer needs to manage its distributors’ participation in a discriminant, process-oriented, and system-sensitive manner by addressing the latter’s diverse motivations, changing goals in the joint program, and influences from peer distributors.”Raju and Zhang (2017) examine channel coordination in the presence of a dominant retailer. They show that a manufacturer is better off coordinating a dominant retailer channel though quantity discounts when the costs of retail services is high and through a menu of two-part tariffs when the cost is low, or when the retailer is highly dominant. Finally, results indicate that the phenomenon of “street money” (i.e., a lump sum, discretionary payment from a manufacturer to a retailer for demand stimulating services from the retailer such as feature advertisements) can arise from the manufacturer’s effort to mete out minimum incentives to power retailers in order to coordinate a channel.Performance AppraisalChannel GovernanceBrown et al. (2000) examine how brand headquarters’ ownership, specialized investments, and relational exchange impact opportunism in the channel. Only the building of effective relational exchange (i.e., preservation of the relationship, role integrity, and harmonization of conflict) effectively limited opportunism. When brand headquarters aggressively exerted rights of ownership, especially when specialized investments and relational exchange are high, it appears to exacerbate rather than limit opportunism.Antia et al. (2006) explore how enforcement deters gray market incidence. Deterrence of gray market activity results only when the multiple facets of enforcement are used in combination. Specifically, deterrence is likely to occur when the penalties for gray market violations are severe, when manufacturers are able to detect violations or mete out punishments in a timely manner, and swift enforcement action is taken.Kashyap et al. (2012) Contractual completeness is negatively related to behavior monitoring and enforcement. The deployment of one-sided contracts is positively related to behavior monitoring and negatively related to enforcement.The provision of extra-contractual incentives is positively related to behavior monitoring, output monitoring, and enforcement.The combination of high levels of behavior monitoring and output monitoring is positively associated with compliance and inversely related to opportunism.At high levels of behavior monitoring, increasing enforcement is positively related to opportunism and inversely related to compliance. The positive impact of enforcement on compliance is strengthened when accompanied by a high level of output monitoring.Heide et al. (2007) call for research on the efficacy of “constellations of governance mechanisms.” Heeding this call, Kashyap and Murtha (2017) show that ex ante contractual completeness can impact the ability of ex post governance to drive important channel member behaviors. Specifically, they find that the efficacy of the franchisor’s monitoring and enforcement efforts in eliciting franchisee compliance is influenced by specific contractual clauses related to monitoring and enforcement. “Thus, ex post governance efforts are assessed by channel members against the backdrop in which these efforts are designed …” (Kashyap and Murtha 2017, p. 146). Yang et al. (2012)Wang et al. (2013)Kashyap and Mutha (20170Kumar et al. (2011)Relational GovernanceThe possible benefits of reliance on relational governance in channel relationships can be many. Where relational norms are firmly established, channel members should exhibit a willingness to strive for joint solutions in closely tied exchange relationships (Heide and John 1992). Improved planning, inter-firm coordination, and product support may result. In the process, end-customers may be better served, heightening the possibility of significant gains in payoffs for all parties (cf. Anderson and Narus 1990; Weitz and Jap 1995). Safeguards against opportunism should be present as well (Heide and John 1992).However, the possible costs and risks of relational governance cannot be minimized. The relational norms necessary to make relational governance meaningful, including solidarity, mutuality, flexibility, and information exchange (Heide and John 1992; Lusch and Brown 1996; Macneal 1980), are costly to establish and maintain over time (e.g., communication and coordination costs). Moreover, firm products and services, promotional programs, pricing programs, and channel initiatives all must align with one another to reinforce partner expectations that joint payoffs, not individual firm payoffs, are of utmost importance. Significant opportunity costs are likely to result whenever channel members bypass individual firm payoffs for joint payoffs (e.g., a supplier adding new channels, a supplier increasing distribution intensity, an intermediary adding additional suppliers). Thus this governance mechanism has its constraints. Relational governance is where firms establish and maintain a set of relational norms in their channel relationships to guide what constitutes acceptable behaviors by suppliers and associated intermediaries (Lusch and Brown 1996). Relational norms are expectations about behavior that are at least partially shared by decision makers in supplier and intermediary organizations (Thibaut ad Kelley 1959).OpportunismSeggie et al. (2013)Compliance or ControlValue-AddedFinancial PerformanceMethodsReverse causality. Identifying the causal effect is complicated by the fact that causality clearly runs both ways (Friberg and Sanctuary 2017).Game analytic models can be limited in external validity due to the need for model tractability.Survey dataKashyap and Murtha (2017) assemble a data base composed of survey data from franchisees in the US hotel industry, content analysis of 193 franchise contracts, customer satisfaction scores for each of the 193 hotels from Medallia, Inc.Ray et al. (2016) develop an analytical model and tests its predictions with survey data from resellers in auto-paint refinish industry.The reasons most likely have to do with corporate access, because of the sensitivity of corporate goals, and the lack of faith at the major journals in cross-sectional survey research. For some research topics, the need for construct definition and theory development is only facilitated by carefully planned and executed survey research. An examination of corporate documents and email communications is unlikely to provide the necessary data to examine carefully developed research hypotheses on corporate goals and channel management.Desai (2000) game theoryAhmadi and Yang (2000) game theoryKadiyali et al. (2000), game theory and 218 weeks of data from Dominick’s Fine Foods (refrigerated juice and tuna)Srivastava et al. (2000) game theory and experimental economics (two MBA student experiments)Sudhir (2001) game theory and scanner data (yogurt and peanut butter)Kumar et al. (2001) game theoryBanks et al. (2002) game-theoretic bargaining modelShaffer and Zettelmeyer (2004) Hotelling model of demandWang (2004) game theoryMoorthy (2004) game theoryRaju and Zhang (2005) game theoryArya and Mittendorf (2006) analytical modelLiu and Zhang (2006) game theoryRay et al. (2006) economic model and scanner dataCaldieraro and Coughlan (2007) analytical modelLuo et al. (2007) conjoint model and game theory. We merge consumer preference data obtained in a conjoint experiment with game-theoretic models to estimate how the retailer and the competing manufacturers will react to the specific new product concepts, and whether the retailer would find a given concept acceptable.Geylani et al. (2007) game theoryGal-Or et al. (2008) analytical modelMcGuire and Staelin (2008) game theoryAnderson (2008) surveyBhaskaran and Gilbert (2009) game theoryRaut et al. (2008) game theoryDukes and Liu (2010) analytical modelNijs et al. (2010) analytical model and scanner data in a major consumer packaged goods categoryLiu and Cui (2010) game theoryShulman et al. (2010) game theoryLu amd Lee (2011) game theoryDanaher et al. (2010) DVD sales dataSa Vinhas and Heide (2015) survey of distributorsBhargava (2012) game theoryNijs et al (2014), econometric model and data on quantities, prices, and costsSteenkamp and Geyskens (2014) scanner data and consumer survey dataMontagutti et al. (2016) field experimentOzturk et al. (2016) Secondary data from a marketing research firm, secondary data on bacnruptcy filings and press releases, demographics from the SimplyMap databaseJiang et al. (2016) analytical modelJerath et al. (2017) analytical model Biases in the composition of marketing faculty at the top business schools, backgrounds and research preferences of marketing Ph.D. students, and research methods exist in our discipline that impact what marketing scholars examine to the detriment of channels research. Hopefully such biases can be corrected in the near future.Specialized investments are the non-recoverable expenditures a supplier makes to support the sales of its products and services by intermediary organizations (Rokkan et al. 2003; Williamson 1985). They signal a supplier’s good faith and willingness to do what is required to assist intermediaries in marketing and selling its products and services (Buchanan 1992; Rusbult 1980). As Anderson and Weitz (1992, p. 21) emphasize, “Observing the other party’s pledges causes a channel member to be more confident in the other party’s commitment to the relationship.” DISCUSSIONThe purpose of this article is to examine channels research over the past two decades since the review by Frazier (1999) and provide a perspective on how channels research should proceed to promote the most progress. Accordingly, future research needs are stressed throughout the article. 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