Channel Coordination Mechanisms for Customer Satisfaction

Wujin Chu and Preyas S. Desai
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Wujin Chu: Seoul National University
Preyas S. Desai: Purdue University

Marketing Science, 1995, vol. 14, issue 4, 343-359

Abstract: We consider two broad categories of incentives by which a manufacturer can motivate its retailers to provide high customer satisfaction: (1) manufacturer assistance that reduces the retailer's cost of providing customer satisfaction (CS assistance); and (2) customer satisfaction index (CSI) bonus. We show that if a retailer has a long-term orientation, CS assistance is a more effective coordination mechanism that induces the retailer to expend more effort at customer satisfaction. However, if the retailer has a short-term orientation, CSI bonus is a more effective coordination mechanism. We then show that a long-term oriented retailer is more valuable to a manufacturer than a short-term oriented one. Finally, we show that the use of CS incentives results in greater profits for both the manufacturer and the retailer.

Keywords: channels of distribution; customer satisfaction; incentives; game theory (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (53)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:14:y:1995:i:4:p:343-359

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