Report title: Channel Coordination of Storable Goods

Reported by: Krista J. Li, Associate Professor, Kelley School of Business, Indiana University

Time: 9:00-11:00 am, November 17, 2022 (Thursday)

Tencent Conference: Tencent Conference No. 538 231 248

Content introduction:

Manufacturers of consumer packaged goods invest heavily in trade promotions (i.e., temporary wholesale price discounts), but retailer stockpiling often yields trade promotions unprofitable. In this paper, we investigate how a manufacturer should respond to the retailer's and consumers' stockpiling ability by contracting with the retailer. Specifically, we examine when the manufacturer should restrict the retailer's stockpiling ability and when it should issue trade promotions. Our analysis suggests that: First, the manufacturer should restrict the retailer's stockpiling ability when the storage cost is low. Such restriction also benefits the retailer, resulting in a win-win outcome. Second, the manufacturer should offer trade promotions when the retailer cannot stockpile products and the storage cost is low but raise the wholesale price when the retailer can stockpile products. Third, stockpiling improves channel coordination and increases the manufacturer's profit. Therefore, the manufacturer should design products to be more storable.

Profile:

Krista J. Li is an Associate Professor of Marketing and Weimer Faculty Fellow at the Kelley School of Business at Indiana University. She applies game-theoretic and empirical models to examine how marketers improve product, pricing, and channel decisions by leveraging consumers' data (e.g., purchase histories, profiles) and behavioral biases (e.g., fairness concerns, self-control problems, status preferences, and loss aversion). Her research has appeared in Marketing Science, Management Science, Journal of Marketing Research, Journal of Marketing, Manufacturing and Service Operations Management, Production and Operations Management, Strategic Management Journal, International Journal of Research in Marketing, and Decision Sciences. She serves as an Associate Editor at Marketing Science, and she also serves on the Editorial Review Board of the Journal of Marketing Research and Decision Sciences. Krista was selected as a Marketing Science Institute Young Scholar in 2021, a title awarded to “potential leaders of the next generation of marketing academics.”

(Undertaken by: Department of Management Science and Logistics, Scientific Research and Academic Exchange Center)