Development of a theory of retailer response to manufacturers' everyday low cost programs

Abstract Manufacturers' everyday low cost (EDLC) programs have been prescribed as a means of eliminating inefficiencies associated with trade deals. However, the long-term success of EDLC programs is largely dependent upon favorable responses from retailers. In an effort to investigate retailer response to manufacturers' EDLC programs, in-depth interviews were conducted with executives of retail and manufacturing firms. Data analysis was guided by Glaser and Strauss' grounded theory approach. These efforts resulted in theory detailing antecedents and consequences of the focal construct, “retailer attitude toward the EDLC program.” Research findings indicate that retailers' attitudes toward EDLC programs are based on an assessment of the compatibility between the program and their marketing environment. Several factors including retailer characteristics (e.g., perceived weakness in buying power, commitment to forward buying) and program characteristics (e.g., whether program is optional, product storage costs) were found to influence retailers' assessments of program/environment compatibility and in turn their attitudes toward EDLC programs. Whether retailers' attitudes toward EDLC programs led to supportive, nonsupportive, or adaptive behaviors was found to be contingent upon the relative dependence existing within the channel relationship. The implications of these findings on the development and diffusion of pricing/promotion initiatives are discussed.

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