Competitive Consequences of Using a Category Captain

Management Science, Vol. 56, No. 10, pp. 1739-1765, 2010

Posted: 19 Sep 2011 Last revised: 5 Apr 2012

See all articles by Upender Subramanian

Upender Subramanian

University of Texas at Dallas - Naveen Jindal School of Management

Jagmohan S. Raju

University of Pennsylvania - Marketing Department

Sanjay K. Dhar

University of Chicago - Marketing Management

Yusong Wang

Fudan University - School of Management

Date Written: October 1, 2010

Abstract

Many retailers designate one national brand manufacturer in each product category as a “category captain” to help manage the entire category. A category captain may perform demand-enhancing services such as better shelf arrangements, shelf-space management, and design and management of in-store displays. In this paper, we examine when and why a retailer may engage one manufacturer exclusively as a category captain to provide such service and the implications. We find that demand substitutability of competing brands gives rise to a service efficiency effect – service that expands the category is more effective in increasing a manufacturer’s sales and margin than service that shifts demand from a rival’s brand. We show that the service efficiency effect may motivate a category captain to provide a service that benefits all brands in the category even though doing so is more costly. We further show that, in categories that are less price competitive, there is higher competition between manufacturers to become the category captain. Consequently, a retailer may obtain better service by using a category captain than by engaging both manufacturers simultaneously. Our findings may help explain why a retailer may rely on a category captain despite concerns regarding opportunism and why there is limited empirical evidence of harm to rival manufacturers.

Keywords: category management, delegation, distribution channels, retailing, suppy chain collaboration

JEL Classification: L13, L42, L81, C72

Suggested Citation

Subramanian, Upender and Raju, Jagmohan S. and Dhar, Sanjay K. and Wang, Yusong, Competitive Consequences of Using a Category Captain (October 1, 2010). Management Science, Vol. 56, No. 10, pp. 1739-1765, 2010. Available at SSRN: https://ssrn.com/abstract=1930632

Upender Subramanian (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

Dallas, TX
United States

Jagmohan S. Raju

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-1114 (Phone)
215-898-2534 (Fax)

Sanjay K. Dhar

University of Chicago - Marketing Management ( email )

Rosenwald 331C
Chicago, IL 60637
United States
773-702-3005 (Phone)
773-702-0458 (Fax)

Yusong Wang

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

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