Vertical Strategy Detection In a Multi-Product Channel
W.E. Kuiper · 2000
A method is outlined to detect price-setting strategies of marketing channel members in a multi-product channel. It is assumed that a typical channel consists of many consumers, a single retailer and a number of suppliers, each supplier selling a single product to the retailer. Three pricing scenarios are considered: 1. supplier product management; 2. retailer category management; and 3. supplier product management for some products and retailer category management for the other products. These scenarios imply a large number of pricing strategies. Consumer demand is modelled and estimated using data on the retail level. From these data and estimates upstream prices can be derived and compared with actual prices to detect which strategy fits best. An empirical application reveals that in the period 1994 –1996, growers of vegetables in the Netherlands might have been suffering from a lack of market-orientation and from vertical control by retailers. Moreover, it appears that at the retail level consumer prices depend on the quantity available.