The effectiveness of advertising and price during conflict delistings

Abstract

Negotiations between manufacturers and retailers often go sour and result in conflict delistings in which the manufacturers’ products are removed from the retailers’ assortment. While conflict delistings can cause major revenue and market share losses for both manufacturers and retailers, prior literature provides little guidance on how to use marketing actions to alleviate these severe damages. To fill this gap, the authors use a contingency framework to assess the impact of advertising and price for both manufacturers and retailers in different conflict delisting situations. Using household scanner data for different conflict delistings, this study reveals that overall the impact of advertising decreases during the conflict delisting for both involved parties while price reductions become more effective for the brand manufacturer (but not the retailer). Importantly, the impact of advertising and price during the conflict delisting depends on conflict characteristics. The impact of advertising will be higher if the firm initiated the conflict and when the conflict is surrounded by a lot of publicity. Price reductions are particularly interesting for retailers, especially when the conflict involved a smaller elimination size, when the retailer was the initiator of the conflict, and when there was less publicity. Price reductions are also fruitful for brand manufacturers in case they did not initiate the conflict.