Commentary—Managing Channel Profits

Abstract

Channel coordination and, more generally, coordination of activities between interdependent economic agents is even more important today than when the paper was published more than 20 years ago. One reason is the trend toward globalization and outsourcing caused, in part, by the development of increasingly complex products and services that integrate many different competencies. Coordination today involves all the aspects of the marketing mix: product design coordination, price and service coordination (the focus of “Managing Channel Profits”), coordination of availability in highly hybrid distribution systems to better reach an increasingly complex and fragmented market, and coordination of communication with the target market. “Managing Channel Profits” argues a tendency toward a lack of coordination without explicit institutional arrangements and coordination mechanisms such as quantity discounts and contracts to solve the problem. The price and service coordination ideas of “Managing Channel Profits” have been successfully applied for 25 years of developments in marketing of revenue- and cost-sharing arrangements between increasingly interdependent market participants.