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Abstract

Consumers may need help using an inherently complex product after purchase. This article studies a manufacturer's and a retailer's incentives to provide presales service and after-sales support in a distribution channel. The authors consider a model in which a manufacturer makes wholesale price and channel service decisions. Subsequently, a retailer makes retail price and channel service decisions. They find that, in equilibrium, both channel members provide presales service. If the fixed-cost investment needed to enhance the effectiveness of after-sales support is small, the manufacturer lets the retailer provide after-sales support. Yet when it is above a threshold and the retailer becomes unwilling to invest in providing after-sales support, the manufacturer steps in and does so. As expected, when the fixed cost is too large, the manufacturer also opts out of providing after-sales support. Interestingly, when the retailer provides after-sales support, the level of presales service and the demand for after-sales support can simultaneously be the highest among all configurations. Finally, the authors demonstrate the robustness of their main results by studying alternative channel service configurations.

Keywords

distribution channel presales service after-sales support customer service

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Service Provision in Distribution Channels

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