National advertising, dual -channel coordination and firm performance

With the rapid development of e-commerce, many manufacturers nowadays opt to open an online channel to engage in direct online sales. The mix of retailing with an online channel adds a new dimension of competition and complementarily to a product's distribution channels. Our model focuses on the strategic effect of the manufacturer's national advertising on alleviating the channel competition. We use a game-theoretical model to show that opening an online channel with the added national advertising effectively alleviates the channel conflict and thus helps improve the whole channel and each channel member performance. Depending on the different product categories and the degree of channel substitutability, the manufacturer's investment in the national advertising also will be different. The value of national advertising increases as product is more compatible with online sales and channel substitutability increases.(C) 2013 Elsevier Ltd. All rights reserved.