Take Action

Home | Faculty & Research Overview | Research

Research Details

Advertising in a Distribution Channel, Marketing Science

Abstract

Conventional wisdom suggests that one of the goals of manufacturer advertising is to reduce the cross-price elasticity between products (make one's own and rivals' products appear to be less substitutable in the eyes of consumers). Conventional wisdom also suggests that, all else being equal, retailers will be able to obtain better terms of trade from manufacturers the more substitutable are the manufacturers' products. It follows that retailers should be opposed to advertising that has the effect of reducing cross-price elasticities and thus that manufacturer advertising can be a source of channel conflict. We show that these conventional wisdoms need not hold when only some consumers are exposed to the advertising messages. Using a Hotelling model of demand, we show that (1) manufacturers can be worse off from advertising that reduces the cross-price elasticities between their products, (2) channel conflict need not arise, even when the sole purpose of advertising is to affect cross-price elasticities, and (3) depending on its bargaining power, a retailer can be better off when the manufacturers' products are perceived to be less substitutable.

Type

Article

Author(s)

Greg Shaffer, Florian Zettelmeyer

Date Published

2004

Citations

Shaffer, Greg, and Florian Zettelmeyer. 2004. Advertising in a Distribution Channel. Marketing Science. 23(4): 619-628.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action