Abstract
This paper shows how analytic modeling research in the Marketing field is focused on answering questions of “How?” and “Why?” It describes the disciplines involved in analytic modeling; examines how the key criteria of parsimony and robustness help to define a good model; and discusses other goodness criteria, including appropriate use of analytic techniques, applicability of the model to institutionally rich, real-world problems, non-obvious results, generalizability, and ability to provide insight where other research techniques do not work. The paper defines and discusses key concepts in analytic models of distribution channels, including double marginalization, coordination, incentive alignment and contract design, strategic substitutability and complementarity, externalities, and principal–agent problems. Next, the paper summarizes research presented in the session on analytic models in channels at the Erin Anderson conference; and finally, the paper suggests avenues for future analytic modeling research.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Ockham’s razor is the principle that a theory should make as few assumptions as possible, and in particular, should omit assumptions that have no effect on the predictions of the theory. This principle is attributed to William of Ockham, an English logician and Franciscan friar who lived in the fourteenth century. The philosopher Karl Popper argued that a simpler theory is preferred to a more complex one because it is more easily falsifiable, being applicable in more situations. These two concepts together suggest the value of parsimony as well as robustness, and also clearly set up the tension between the two concepts.
The “smart MBA criterion” is attributed to Rick Staelin.
References
Akerlof, G. A. (1970). The market for ‘Lemons’: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500.
Arrow, K. (1964). Control in large organizations. Management Science, 10, 397–408.
Balachander, S., & Srinivasan, K. (1998). Quantity discounts, manufacturer and channel profit maximization: Impact of retailer heterogeneity. Marketing Letters, 9(2), 169–179.
Blattberg, R. C., & Fox, E. J. (1995). Category management: Getting started, guide 1. Washington DC: Research Department, Food Marketing Institute.
Business 2.0 (2003). Who’s minding the store? CNNMoney.com. Available at http://money.cnnn.com/magazines/business2/business2_archive/2--3/02/01/335956/index.htm
Carameli, L. S., Jr. (2004). The anti-competitive effects and anti-trust implications of category management and category captains of consumer products. Chicago-Kent Law Review, 79, 1315–1355.
Choi, S. C. (1991). Price competition in a channel structure with a common retailer. Marketing Science, 10(4), 271–296.
Chu, W. (1992). Demand signalling and screening in channels of distribution. Marketing Science, 11(4), 327–347.
Coughlan, A. (1985). Competition and cooperation in marketing channel choice: Theory and application. Marketing Science, 4(2), 110–129.
Coughlan, A. T., & Wernerfelt, B. (1989). On credible delegation by oligopolists: A discussion of distribution channel management. Management Science, 35(2), 226–239.
Croson, R., & Donohue, K. (2006). Behavioral causes of the bullwhip effect and the observed value of inventory information. Management Science, 52(2), 323.
Cui, T. H., Raju, J. S., & Zhang, Z. J. (2007). Fairness and channel coordination. Management Science.
FTC Report (2001). Report on the federal trade commission workshop on slotting allowances and other marketing practices in the grocery industry.
Gruen, T. W., & Shah, R. (2000). Determinants and outcomes of plan and objectivity and implementation in category management relationships. Journal of Retailing, 76(4), 483–510.
Hofstetter, J. (2006). Assessing the contribution of ECR. ECR Journal, 6(1), 20–29.
Hotelling, H. (1929). Stability in competition. Economic Journal, 39, 41–57.
Ingene, C. A., & Parry, M. E. (1995a). Coordination and manufacturer profit maximization: The multiple retailer channel. Journal of Retailing, 71(2), 129–151.
Ingene, C. A., & Parry, M. E. (1995b). Channel coordination when retailers compete. Marketing Science, 14(4), 360–377.
Ingene, C. A., & Parry, M. E. (1998). Manufacturer-optimal wholesale pricing when retailers compete. Marketing Letters, 9(1), 65–77.
Iyer, G. (1998). Coordinating channels under price and non-price competition. Marketing Science, 17(4), 338–355.
Jeuland, A., & Shugan, S. M. (1983). Managing channel profits. Marketing Science, 2(3), 239–272.
Lal, R., & Narasimhan, C. (1996). The inverse relationship between manufacturer and retailer margins: A theory. Marketing Science, 15(2), 132–151.
Lee, E., & Staelin, R. (1997). Vertical strategic interaction: Implications for channel pricing strategy. Marketing Science, 16(3), 185–207.
Lim, N., & Ho, T.-H. (2007). Designing price contracts for boundedly rational customers: Does the number of blocks matter? Marketing Science.
Lindblom, A., & Olkkonen, R. (2008). An analysis of suppliers’ role in category management collaboration. Journal of Retailing and Consumer Services, 15, 1–8.
Loch, C. H., Wu, Y. (2008). Social preferences and supply chain performance: An experimental study. Management Science.
McGuire, T. W., & Staelin, R. (1983). An industry equilibrium analysis of downstream vertical integration. Marketing Science, 2(2), 161–191.
Moorthy, K. S. (1987). Managing channel profits: Comment. Marketing Science, 6(4), 375–379.
Moorthy, K. S. (1988). Strategic decentralization in channels. Marketing Science, 7(4), 335–355.
Moorthy, K. S. (1993). Theoretical modeling in marketing. The Journal of Marketing, 57(2), 92–106.
Padmanabhan, V., & Rao, R. C. (1993). Warranty policy and extended service contracts: theory and an application to automobiles. Marketing Science, 12(3), 230–247.
Pauly, M. V. (1968). The economics of moral hazard: Comment. The American Economic Review, 58(1), 531–537.
Progressive Grocer (2007). Category management goes beyond grocery: Cannondale report. Feb 2007.
Raju, J., & Zhang, J. (2005). Channel coordination in the presence of a dominant retailer. Marketing Science, 24(2), 254–262.
Rothschild, M., & Stiglitz, J. (1976). Equilibrium in competitive insurance markets: An essay on the economics of imperfect information. The Quarterly Journal of Economics, 90, 629–649.
Shulman, J. D., Coughlan, A. T., & Canan Savaskan, R. (2009). Optimal restocking fees and information provision in an integrated demand-supply model of product returns. Manufacturing & Service Operations Management, Published online in Articles in Advance, DOI:. doi:10.1287/msom.1090.0256.
Soberman, D. A. (2003). Simultaneous signalling and screening with warranties. Journal of Marketing Research, 40, 176–209.
Wright, J. (2006). Antitrust analysis of category management: Conwood v.s. United Sates Tobacco Co. Geroge Mason University Law and Economics Research Paper Series. Available from SSRN: http://ssrn.com/abstract_id=945178. Last retrieved on Mar 23, 2008.
Author information
Authors and Affiliations
Corresponding author
Additional information
Arising from The Erin Anderson Research Conference at the Wharton School, University of Pennsylvania, October 2008
This version: January 20, 2010
Rights and permissions
About this article
Cite this article
Coughlan, A.T., Choi, S.C., Chu, W. et al. Marketing modeling reality and the realities of marketing modeling. Mark Lett 21, 317–333 (2010). https://doi.org/10.1007/s11002-010-9110-5
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11002-010-9110-5