Getting Multi-Channel Distribution Right

CHAPTER 15Managing Prices and Incentives Across Channels

15.1 INTRODUCTION

In the previous chapter, we made the point that offering variable price schedules and trade promotions, rather than charging a fixed supplier price, allows suppliers to influence the prices that resellers charge to consumers and coordinate the channel. We also laid out the challenges of designing and assessing the effectiveness of trade promotions, especially those whose goal is to encourage price promotions by resellers to consumers. However, many trade promotions and incentives offered by suppliers to their channel partners are not aimed at reducing prices to consumers. Channel incentives, more broadly, try to motivate resellers to stock, price, merchandise, and support products to consumers in the way the supplier would like, while generating profitable sales in the market. For example, their goal may be to not let prices go down, to reward non-price selling effort, to support specific channels that perform other valued functions and/or are vulnerable to being showroomed.

Control over reseller pricing can be one of the most important aspects of keeping the peace in distribution channels. When new types of distribution channels emerge and are adopted, pricing challenges can and often do increase. Certainly, that has happened with the growing prevalence of online channels. In this chapter, we first offer a way to organize the many types of channel incentives that exist in the market according to their ...