Distribution Channel Choice Research Articles

Determinants of digitally instigated insurance relationships

PurposeThe purpose of this paper is to develop a conceptual model for explaining insurance customers' intentions towards using the internet as a channel for communication and interaction with insurance companies by integrating Technology Acceptance Model (TAM) and trust.Design/methodology/approachThe paper seeks to conceptually develop an integrated framework for studying and measuring the perceptions of customers towards using the internet as a source of communication and interaction. The TAM model is taken as a point of departure where trust and trustworthiness, being essential in insurance relationships, have been included in the model. Trust is divided into perceived competence, perceived benevolence and perceived integrity, which in turn affect whether the customer will find the firm trustworthy or not. A second dimension that is developed in this paper is the disposition to trust, which is defined as a customer‐related factor. This disposition to trust is in turn affected by the customer's internet knowledge and product knowledge.FindingsThe paper contributes by developing the model for understanding and explaining factors that affect customers' attitudes and intentions towards on‐line interactions. By emphasizing internet‐, customer‐ and Ffrm‐related factors, it would arguably be possible to explain factors that affect trust, and trustworthiness, as well as the customer's attitudes towards the organization and the communication and distribution channel while also integrating the customer‐specific factors.Research limitationsThe model developed in this paper is conceptual and needs to be tested empirically.Originality/valueThe findings of this paper will serve as a basis for further research aiming at answering the research question on what factors affect customers' attitudes towards using the internet as an interface within the financial services sector. It also contributes to practices by identifying and defining factors that can affect trust in relationships as well as the choice of communication and distribution channels depending on customers' attitudes.

A New Paradigm for Freight Demand Modeling: The Physical Distribution Channel Choice Approach

The objective of this study is to open up a new paradigm for freight demand analysis. This study proposes to use physical distribution channel choice models which can replace so called freight mode and route models. The basic notion of this approach is that shippers choose the distribution channels which minimize the overall logistics costs including inventory cost, transportation cost, etc., which are not incorporated well in the traditional four-step based approach. As a case study, this research developed physical distribution channel choice models reflecting decision making of the firms and analyzed how choice decision factors influence the selection of distribution channels. The distribution channel survey data in Korea was used to do an empirical study. In creating a choice set, Korean distribution channels were classified into two main choice channels which are direct and indirect channels. It was found that the logit model was suitable for the modeling distribution channel choice and the proposed new paradigm for freight demand analysis could be a viable alternate approach for the traditional four-step method.

The effects of demand uncertainty on channel structure

Motivated by the business practice whereby some manufacturers open their own retail stores despite the existence of more efficient independent retailers, this paper examines the distribution channel choice of competing manufacturers under demand uncertainty and resale price maintenance. We characterize the conditions for the equilibrium channel structures. We find that (1) manufacturers tend to distribute products with more design attributes through their own retail stores, (2) manufacturers with highly substitutable products are more likely to use independent retailers, and (3) at least one manufacturer has more incentive to open its own retail stores when facing an increase of the market size asymmetry.

Electronic books: To “E” or not to “E”? A strategic analysis of distribution channel choices of publishers

The advent of electronic books (e-books) has significantly impacted the publishing industry in recent years. The prevalence of e-books has prompted many publishers to reconsider their distribution channels for new titles. They need to decide whether to sell the e-book version of new titles. We derive the conditions under which a publisher should sell only printed books (p-books), only e-books, and both of them simultaneously. We analyze the impact of reader acceptance of e-book and the wholesale price of the counterpart p-book on the distribution channel choice of the publisher under stochastic demand. We find that only if wholesale price of p-book is high and reader acceptance of e-book is low should the publisher sell only p-books; otherwise, he should sell e-books, even when reader acceptance of e-book is low, i.e., in most cases the publisher should sell e-books (perhaps selling p-books simultaneously). In general, the higher the reader acceptance of e-book is, the more the publisher tends to sell the e-book to readers directly. However, our analysis also shows that even when reader acceptance of e-book is very high, the publisher does not necessarily sell only e-books. The wholesale price reflects the publisher's power of negotiation over bookstores. The higher the publisher's power of negotiation over bookstores is, the more he is inclined to sell p-books; and when reader acceptance of e-book is relatively high, the lower the publisher's power of negotiation is, the more he tends to sell only e-books.

Command & Control in the Multidimensional Organization

Chandler’s dictum ‘structure follows strategy… but the market is the common denominator’ during the twentieth century was answered effectively by the one-dimensional multi-divisional organization, both in business as in government. Today’s markets have a dynamic multidimensionality; customers having multiple preferences, dependent on time, day of the week, context of activities, and having a choice of information and distribution channels. To be in-control in such market requires multi-dimensional management accounting systems. Resources have changed from physical to uncodified personal knowledge and resourcefulness. With that the basis of motivation of workers is changing from being position oriented to contribution oriented. The resource allocation process has to give way to resource mobilization. A number of firms effectively have answered this complexity by adopting a multidimensional organization. The paper explains how these firms are effective and by what social, administrative, and technical measures they have transformed traditional ideas about amongst others authority, control, management and rewards, to create organizations which proof to be effective in dynamic complex environments. Consequences for qualifications of executives and managers are discussed. The paper also discusses why the fundamental transformation these firms have accomplished implies a change in the paradigms of management of change and of organization design.

Análisis de los factores que condicionan la elección del canal de compra por parte del consumidor: evidencias empíricas en la industria hotelera

This work focuses on analyzing the economic factors that influence the consumer's distribution channel choice. With this aim, we use the Agency Theory in order to understand the influence of related problems such as information asymmetries and opportunism. All of this is taken into account to examine the booking process of a particular tourism service: a hotel overnight. The analysis of a sample of 1,029 tourists who had made their booking either through Internet or through traditional channels has revealed interesting findings: (1) the main sources of uncertainty in the phases prior to the purchase choice are determined by the lack of trust towards the Internet, (2) signals emitted by firms to mitigate information asymmetries contribute to build trust towards the company chosen, and (3) trust towards selected firms shows how the buyer makes the reservation through the channel with the lowest perceived risk.

Development of Physical Distribution Channel Choice Model for Freight Modeling

Development of Physical Distribution Channel Choice Model for Freight Modeling

Determinants of distribution channel choice for online software license purchases: A theoretical model

The digital nature of software products combined with the advent of the internet has allowed for the proliferation of a new software delivery option: the digital distribution of software. Unfortunately, the diffusion of this new software delivery option has also facilitated copyright infringement and the distribution of pirated content. In response to these threats, software publishers have started applying various copy protection solutions to trial versions to make it more difficult for nonlicense holders to gain full access to products beyond their evaluation periods. In an escalating effort, some software publishers are now using digital rights management (DRM) technologies (among the various other distribution options they provide to their customers) when distributing software products online. By casting the software distribution channel choice as a transaction cost analysis (TCA) problem, this research proposes a theoretical model to uncover the reasons why, when purchasing a software license for a product that is marketed using a “try-before-you-buy” strategy, consumers would select the physical distribution channel not tied to any DRM technologies (ie, CD-ROM) rather than the digital distribution channel that uses DRM technologies (ie, electronic software distribution through demo-unlock).

Factors affecting the marketing channel choice of sheep and goat farmers in the region of east Macedonia in Greece regarding the distribution of their milk production

This study aims to identify the factors that affect the sheep and goat farmers in the Region of East Macedonia and Thrace (Region of EMTh) in Greece in their milk distribution channel choice. The survey was conducting through field interviews based on a questionnaire that was designed by the researchers. The questionnaire was pre-tested in Autumn of 2001. A pilot survey was conducted in the same period while the main survey took place in Spring of 2002 on a sample of 343 farmers that were selected at random. The factors derived from the multivariate statistical analysis are: (a) production orientation, (b) cost focus, (c) profit orientation, (d) differentiation and (e) interpersonal relationships. The main marketing channels that the sheep and goat farmers in the Region of EMTh use for selling their milk are: (a) to local private milk processing plants, (b) co-operative milk processing plants, (c) big national dairy firms and (d) private use of milk. A χ 2-analysis was performed to profile the farmers using each marketing channel regarding their farm and personal characteristics. The Kruskal–Wallis non-parametric test as well as a logistic regression analysis were used to explore the factors that affect farmers marketing channel selection. Many farm and farmers’ characteristics such as the size of the flock, volume of milk production, farm income, debt, found to affect the distribution channel choice. Factors including sales price, speed of payment, loyalty also have a significant influence on a marketing outlet selection.

Modelling consumer choice of distribution channels: an illustration from financial services

With channels of distribution changing rapidly and multi‐channeling becoming increasingly widespread, studies of consumers will need to focus not just on understanding product choice, but also on understanding the reasons for channel choice. Although the choice of individual channels and the adoption of new channels has been researched, there is little to suggest that we have a more general understanding of why consumers, although purchasing essentially similar products, use some channels rather than others. Using the example of financial services, where multi‐channeling has been the norm for some time, this paper reports on an exploratory study to identify those factors which influence channel choice. Based on the results of focus group discussions, the paper argues that channel choice in financial service can usefully be conceptualised as being determined by consumer, product channel and organisational characteristics, with product‐channel interactions and consumer‐channel interactions being particularly important.

Will Online Shopping Compete More with Traditional Retailing or Catalog Shopping

This paper examines consumer substitution behavior among three distribution channels: online shopping, traditional retail and catalog shopping. A model of consumer transactions costs is presented in which consumer investments in shopping human capital determine distribution channel choice. This model predicts that consumers who make investments that “spillover” to multiple channels will tend to have lower transactions costs for those two channels and will tend to consider these two channels to be closer substitutes than other channels. The model implies that, even if these investments are not measured, they will represent a component of the regression models' residual terms, which will predict distribution channel choice. I test this implication using the GVU Center's survey data on channel selection for various product categories. The results strongly suggest that consumers consider online shopping and catalog shopping to be closer substitutes than any other pair of channels.

How important is marketing in China today to Sino–foreign joint ventures?

This paper presents the result of an exploratory survey of the role of marketing in China from the perspectives of foreign partners in 35 major Sino–foreign joint ventures. The result shows that China is already an integral part of the global market for many multinational companies, and increasingly, has become a significant part of their corporate business portfolios. Western marketing techniques and concepts have widely been considered effective in China. Multinational companies tend to standardize brand policy, product positioning, product lines and customer services and `localize' their choice of distribution channel, promotion, and market segmentation. Managerial implications are discussed.

Investor self-selection: evidence from a mutual fund survey

Using survey data on a random sample of 2000 mutual fund investors, we classify investors by their level of financial literacy and their place of mutual fund purchase. After using a probit model to separately estimate the determinants of an investor's choice of distribution channel and level of financial literacy, a bivariate probit model that jointly endogenizes an investor's level of financial literacy and choice of distribution channel is estimated. Strong evidence that an investor's level of financial literacy and choice of distribution channel are jointly determined is found. Thus, the hypothesis put forth in this paper, that investors self-select into different distribution channels based on their overall level of financial literacy, is supported by the data. © 1997 John Wiley & Sons, Ltd.

Third party distribution: Non‐Food Products

Over the last few years, distribution developments in non‐food have been considerable. Centralisation and contract distribution have gained favour, and an increasing number of companies are re‐appraising their choice of distribution channels and systems. Just as in food, distribution systems are having to be changed to meet the demands of the consumer.

Distribution channel choice in a market with complementary goods

In many market situations - such as in shopping centers, grocery stores, industrial-goods distributors, and ‘full-line manufacturers’ - we see the marketing and distribution of complementary products. Sometimes the distribution function is handled by the manufacturer himself, and sometimes it is spun off to an independent distributor or middleman. This paper presents an economics-based model which shows incentives for integration or non-integration of the distribution function based on economies of scale and scope in distribution; complementarity in demand across products; and customers' valuation of the benefits of ‘one-stop shopping’. Such factors explain why manufacturers of narrow product lines may choose to use independent middlemen as a distribution channel, even though that involves a loss of control over retail pricing. They also can explain why the development of a broader product line over time can be accompanied by a switch from a distributor channel to an integrated channel. The model thus extends our understanding of the forces determining distribution channel choice beyond that achieved by other models based on substitutable (rather than complementary) products.

International Market Entry and Expansion via Independent or Integrated Channels of Distribution

Manufacturers introducing an industrial product to a foreign market face a difficult decision. Should the product be marketed primarily by captive agents (company salesforce and company distribution division) or by independent intermediaries (outside sales agents and distributors)? This is an issue of downstream vertical integration. The authors explore the issue through an empirical investigation of distribution channel choice in foreign markets by U.S. semiconductor companies. Using original interview data, they develop scales to measure key variables. With these measures they build a logistic regression model of what factors affect the form of the distribution channel chosen in various foreign markets. The results indicate that integration is associated with the degree of transaction specificity of assets in the distribution function and whether or not the product being introduced is highly differentiated. There is evidence that the product will be sold through whatever channel is already in place, if any. Further, American firms seem more likely to integrate the distribution channel in highly developed industrialized countries (Western Europe) than in Japan and Southeast Asia, which are more culturally dissimilar. Implications for managers faced with a channel choice are explored.

A Note on Manufacturers' Choice of Distribution Channels

Many marketing problems are usually analysed in verbal terms only. For instance, different alternatives as regards the marketing routes, or channels, through which goods and services or their titles flow, are mostly considered in terms of “advantages” and “disadvantages”. Recently, however, techniques aiming at quantification—such as linear programming and search theory—have been gaining favor. This essay purports to clarify, in quantitative terms, some of the considerations that may underlie a manufacturer's choice of distribution channels. We shall limit ourselves to a comparison of two alternatives, namely selling through wholesalers and selling directly to retailers.