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Heide
T
he importance of developing more productive rela- consider gaining retailer participation their single most
tionships between manufacturers and retailers is rec- important problem regarding displays {P-O-P & Sign
ognized widely. A particularly important aspect of Design 1996).
these relationships is retailer participation in manufacturer- Several hypotheses exist regarding why gaining partici-
sponsored in-store display programs. A recent industry sur- pation in display programs is problematic. In some
vey found that 74% of retailers agree that promotion instances, participation is impeded because of goal incom-
allowances enhance their profitability, yet 65% believe they patibility (Ouchi 1980) between the parties in question. As
do not receive their fair share of manufacturers' promotion noted by Ganesan (1993), retailers and manufacturers often
dollars {Progressive Grocer 1995). Retailers believe they possess systematically different orientations toward their
should receive better rewards, because two-thirds of all con- relationships. For example, manufacturers typically want to
sumer purchase decisions are made in the retail store, rather place a given display at minimal expense, whereas retailers
than prior to store visits (Point-of-Purchase Advertising try to maximize profit per square foot.
Institute/DuPont 1986). From a manufacturer's perspective, There are other instances, however, in which retailers
more than $70 billion currently is invested in trade promo- have been found to act in an opportunistic fashion
tions {Progressive Grocer 1995), with more than $12 billion (Williamson 1996) by using a priori allowances from man-
spent on point-of-purchase (POP) materials {Marketing ufacturers, which enhance their own margins, with no inten-
News 1996). However, 85% of manufacturers believe the tion of setting up the display {Chain Store Age 1996; Wal-
money given to retailers is ineffectively spent, and only 19% ters 1989). In some cases, opportunism is benign in nature
consider these expenditures good value {Progressive Grocer (Miner 1987), in that retailers simply overcommit them-
1995). For example, a recent survey of retailers found that selves, given the available floor and shelf space. Schultz and
40% of all manufacturer-supplied POP displays are never Robinson (1992) note that supermarkets typically carry
used (Shutt 1995). It is not surprising that manufacturers more than 10,000 different items yet usually can accommo-
date only 20 display programs. This creates intense compe-
tition among manufacturers that need to access this scarce
John P. Murry, Jr. is an assistant professor, Weatherhead School of Man- space, as well as a substantial task for retailers that must
agement, Case Western Reserve University. Jan B. Heide is an associate coordinate the turnover of displays in the store. In summary,
professor, School of Business, University of Wisconsin-Madison. Both
authors contributed equally to the article. The financial support of the Mar-
it is clear that participation is not the default behavior
keting Science Institute and Promo Edge is gratefully acknowledged. The between manufacturers and retailers.
authors also gratefully acknowledge the assistance of Kerry Meline with Aside from the managerial significance of studying
pretesting and data collection and of Lisa Menendez with data collection, retailer participation in display programs, the present
preparation, and analysis. They also appreciate the help and comments research also will make theoretical contributions. CuiTently,
from Jon Austin, Gilbert Churchill, Deb Dahab, Anne Miner, Christine
several different research streams focus on the antecedent
Moorman, Sarah Schulfz, Jagdip Singh, and Dan Smith at different stages
of this project. conditions that promote certain relationship behaviors or
limit opportunism. For example, economic theory (Klein
Journal of Marketing
58 / Journal of Marketing, January 1998 Vol. 62 (January 1998), 58-68
and Leffler l981;Telser 1980) has explored the capability of Interpersonal Attachments
incentive structures to produce certain patterns of behavior. The recent literature on relationship marketing (e,g,, Mor-
Researchers in organization theory (Eisenhardt 1985; Ouchi gan and Hunt 1994; Wilson 1995) would suggest that
1980) have focused on monitoring, and sociological retailer participation is influenced by the nature of the inter-
re.search (Granovetter 1985; Seabright, Levinthal, and Fich- personal attachments that exist between the boundary per-
man 1992) has explored the effects of social networks and sonnel in the respective firms. Scholars currently disagree,
interpersonal attachments. however, about the actual direction of the effect. Specifi-
In spite of the important insights that have been gener- cally, two independent streams of research suggest that
ated in previous research, key questions remain unanswered. strong interpersonal attachments can impede rather than
The literature mentioned previously rarely distinguishes promote participation. First, using transaction cost logic
between different behaviors within a given relationship. In (e,g,, Williamson 1996), establishing a close relationship is
the manufacturer-retailer context, manufacturers frequently synonymous with removing a relationship from market
succeed in obtaining agreements from retailers to participate governance. Although a shift away from market-based
in promotional programs. At the same time, retailers often exchange is advantageous in some respects, it is problem-
fail to follow up on their original promotion agreements atic in others, primarily because parties' incentives to per-
(Crimmins 1990; Mathews 1995), However, it is not clear form may diminish (D'Aveni and Ravenscraft 1994;
based on past research what the mechanisms are that influ- Phillips 1982), For example, both Moorman, Zaltman, and
ence compliance or whether they differ from those that Deshpande (1992) and Seabright, Levinthal, and Fichman
affect initial agreement, (1992) note that though close relationships often persist
Furthemiore, the various theoretical factors identified in over time, quality or performance in such relationships may
previous research rarely have been examined jointly. This is suffer as the parties begin to take the relationship for
problematic for three reasons. First, and perhaps most granted. Second, early sociological work on the concept of
important, mechanisms such as interpersonal attachments, tie strength (e,g,, Granovetter 1973) suggests that weak ties
incentives, and monitoring manifest themselves in real-life are often useful because they foster sources of new infor-
situations in different combinations (Bradach and Eccles mation. As such, programs that are presented by new sales-
1989), As such, appropriate theory tests should examine the people actually may have success in securing participation.
effect of any one of the relevant mechanisms while explic- Many manufacturers indirectly promote the use of weak
itly controlling for the others. Second, a joint test of the dif- ties by systematically rotating salespeople across retail
ferent mechanisms will allow a test of their relative impor- accounts. In summary, contrary to the positive outcomes
tance in a relationship. Third, an unresolved question is that are attributed intuitively to close relationships, it is
whether the different mechanisms interact in some fash- conceivable that they will fail to influence or will even
ion—by undermining each other, serving as substitutes, or impede retailer participation.
creating synergistic effects. For example, given strong pre- Other research, however, gives a different account of the
existing personal relationships between the boundary per- role that interpersonal attachments play in relationships.
sonnel in the two firms, incentives may have limited effects Early work on boundary-spanning behavior (e,g,, Adams
on retailer participation. Unfortunately, given the focus in 1976; Salancik 1977) suggests that strong interpersonal rela-
previous research on individual factors, little is known about tionships should increase the likelihood of participation.
either their relative importance or combined influence. More recent work on "clans" (Ouchi 1980), "socially
The rest of the article is organized in the following fash- embedded relationships" (Frenzen and Davis 1990; Gra-
ion: In the next section, we develop our conceptual frame- novetter 1985), and "social context" (Gulati 1995; Hakans-
work and present the research hypotheses. This is followed son and Snehota 1995) makes similar points. The core argu-
by a discussion of the research method and results. We dis- ment underlying tbis literature is that the existence of a
cuss the implications of the study in the final section. strong interpersonal relationship reflects prior selection
and/or socialization processes between the parties (Chatman
Determinants of Retailer 1991), The effect of such processes is to align the goals of
the parties in question (Eisenhardt 1985) and reduce the
Participation and Compiiance likelihood of subsequent opportunistic behavior. In the con-
Previous research in sociology (Granovetter 1985), political text at hand, this should manifest itself in both a higher like-
science (Axelrod 1984), economics (Klein and Leffler lihood of manufacturers obtaining agreement from retailers
1981), and organization theory (Ouchi 1980) have identified and more conscientious follow-through on the initial agree-
three general mechanisms for structuring relationships ment (i,e., compliance). In hypothesis form,
between parties that are motivated by self-interest. These
are (I) interpersonal attachments, designed to reduce or H|: Interpersonal attachments between retail managers and
eliminate goal incompatibility between the parties in the manufacturer salespeople increase the likelihood that
retailers (a) agree to participate in display programs and
first place, (2) the use of incentives, which make it econom-
(b) comply with established agreements,
ically attractive for a party to engage in particular behaviors,
and (3) monitoring efforts, intended to reduce information
asymmetries that otherwise might permit noncompliance. incentive Design
These mechanisms and their specific effects are discussed Research in game theory (e,g,, Axelrod 1984; Fudenberg
subsequently. and Maskin 1986) suggests that participation can be pro-
TABLE 2
Regression Models
Agreement Confipliance
Liquor Sample Grocery Sample Liquor Sample Grocery Sample
Standardized Standardized Standardized Standardized
Independent Variable Coefficient t-value Coefficient t-value Coefficient t-value Coefficient t-value
Attachments .10 5,01a ,12 6,14a ,15 6,67a .04 1,83b
Incentive Premium ,36 17.04a .58 28,2ia .42 18,17a .44 19.50a
Payment Method -,38 -18.03a -.24 -11,87a -.43 -18,47a -.20 -9,16a
Monitoring -.05 -2.13b -,03 -1,42= -.04 -1,64b -.03 -1,15
Attachments x
Incentive Premium -.01 -.17 ,03 1,26 ,07 ,03 -.01 -,03
Incentive Premium x
Payment Method -,07 -3,05a -,03 -1,66b ,01 ,36 -,05 -2,33a
Attachments x
Payment Method d d ,01 ,42 ,01 .37
Attachments x
Monitoring d d ,01 ,58 ,01 ,57
R2 adjustedI = .3O R2 adjusted1 = ,41 R2 adjustecl = ,38 R2 adjusted = ,24
ap< ,01,
bp < ,05,
<:p< ,10,
^Effect not hypothesized.
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