Leveraging Distribution to Maximize Firm Performance in Emerging Markets |
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| Institution: | 1. Regents'' Professor, Richard and Susan Lenny Distinguished Chair Professor of Marketing at Georgia State University, United States;2. Chang Jiang Scholar, HUST, China;3. Center for Excellence in Brand and Customer Management, Department of Marketing, J. Mack Robinson College of Business, Georgia State University, Atlanta, GA, United States;1. School of Business and Economics, Maastricht University, Tongersestraat 53, 6211 LM, Maastricht, Netherlands;2. Marketing Division, Babson College, 213 Malloy Hall, Babson College, Babson Park, MA 02457, United States;3. Motivforce Marketing & Incentives, 16 Hanover Square, Mayfair, London W1S 1HT, United Kingdom;4. Statistics Netherlands/Centraal Bureau Voor de Statistiek, CBS-weg 11, 6412 EX Heerlen, Netherlands;1. Department of Marketing, College of Business, City University of Hong Kong, Kowloon, Hong Kong;2. College of Management, Shenzhen University, Shenzhen, China;1. Mays Business School, Texas A&M University, College Station, TX, United States;2. Indian Institute of Management Ahmedabad, Ahmedabad, India;1. University of Kentucky, Lexington, KY 40506, United States;2. Georgetown University, Washington, DC 20057, United States;3. Babson College, Babson Park, MA 02457, United States;4. Florida International University, Miami, FL 33199, United States;5. Dartmouth College, Hanover, NH 03755, United States;1. Newcastle University Business School, 5 Barrack Road, Newcastle upon Tyne NE1 4SE, UK;2. Jones Graduate School of Business, Rice University, McNair Hall, Room 402, United States;3. Jones Graduate School of Business, Rice University, McNair Hall, Room 250, United States;4. University of Rostock, Ulmenstr. 69, 18057 Rostock, Germany |
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| Abstract: | Despite the rise of emerging markets as lucrative destinations for business expansion, marketing literature in this area is largely anecdotal and conceptual. Further, owing to the largely unorganized retail structure in emerging markets, managers tend to make sub-optimal marketing-mix decisions by taking an aggregate view of their distribution network. In this study, we develop an econometric model to help firms develop a multichannel distribution strategy in emerging markets while accounting for (a) own-marketing mix, (b) competitive actions, (c) brand-level heterogeneity, and (d) dependencies that may arise between product offerings. The proposed model is tested on longitudinal data from a large Indian CPG manufacturer. The results indicate that firms must consider store format-specific distribution elasticities (as opposed to aggregate effects), especially in an emerging market, where the role of distribution is critical in brand success. Further, depending on the offering, price (own- and cross-) and advertising elasticities could vary even though the brand is essentially the same. Also, we find that there are significant dependencies between product forms that need to be considered when designing the marketing mix. Finally, we provide re-allocation recommendations to help managers choose the level of store format distribution in order to maximize profits. The proposed distribution re-allocation strategy resulted in an average of 7.7% increase in profits across three product forms for the focal firm. |
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| Keywords: | Multichannel retailing Emerging markets Distribution elasticity Store formats Marketing mix Product forms |
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