Marketing Papers

Document Type

Journal Article

Date of this Version

10-2010

Publication Source

Management Science

Volume

56

Issue

10

Start Page

1739

Last Page

1765

DOI

10.1287/mnsc.1100.1211

Abstract

Many retailers designate one national brand manufacturer in each product category as a “category captain” to help manage the entire category. A category captain may perform demand-enhancing services such as better shelf arrangements, shelf-space management, and design and management of in-store displays. In this paper, we examine when and why a retailer may engage one manufacturer exclusively as a category captain to provide such service and the implications. We find that demand substitutability of competing brands gives rise to a service efficiency effect—service that expands the category is more effective in increasing a manufacturer's sales and margin than service that shifts demand from a rival's brand. We show that the service efficiency effect may motivate a category captain to provide a service that benefits all brands in the category even though doing so is more costly. We further show that, in categories that are less price competitive, there is higher competition between manufacturers to become the category captain. Consequently, a retailer may obtain better service by using a category captain than by engaging both manufacturers simultaneously. Our findings may help explain why a retailer may rely on a category captain despite concerns regarding opportunism and why there is limited empirical evidence of harm to rival manufacturers.

Copyright/Permission Statement

Originally published in Management Science © 2010 INFORMS

This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mnsc.1100.1211

Keywords

category management, delegation, distribution channels, retailing, supply chain, collaboration

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Date Posted: 15 June 2018

This document has been peer reviewed.