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Channel Coordination Mechanisms for Customer Satisfaction

Author

Listed:
  • Wujin Chu

    (Seoul National University)

  • Preyas S. Desai

    (Purdue University)

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.

Suggested Citation

  • Wujin Chu & Preyas S. Desai, 1995. "Channel Coordination Mechanisms for Customer Satisfaction," Marketing Science, INFORMS, vol. 14(4), pages 343-359.
    • Handle: RePEc:inm:ormksc:v:14:y:1995:i:4:p:343-359
    DOI: 10.1287/mksc.14.4.343
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