A route to market is the distinct process through which a product or service can be selected, purchased, ordered, and received by a customer (Frazier & Shervani, 1992). In other words, it represents a “format” for accessing a customer base. A variety of routes to market exists, such as salesforces, retailers, company-owned outlets, call centers, catalogs, and web stores. Each route is a package of different levels of service outputs, search convenience, and costs. An immediate question that arises for a firm is: how broad should the variety of such routes be to offer its products and services to the customers?
Theory suggests that a firm should adopt only a limited variety of routes to market because of the concept of “channel conflict,” which suggests that providing a customer with options to purchase through an extensive variety of routes escalates intrabrand competition in the marketplace (Coughlan, Anderson, Stern, & El-Ansary, 2006). This competition in turn puts pressure on prices, which leads to the alienation of intermediaries. To compensate for their reduced margin, intermediaries are tempted to reduce their level of service outputs and indulge in bait-and-switch tactics (Coughlan et al., 2006). At the extreme, they even may refuse to carry the product or service, which can lead to the erosion of brand image and market share. However, if a firm limits the variety of routes through which a customer can make a purchase, it keeps the intrabrand competition under control. This control ensures the full support and cooperation of the intermediaries, necessary for the successful implementation of the firm's strategic marketing activities, such as the development and roll out of new products and the delivery of customer satisfaction. These arguments hold especially true in industries in which the intermediary plays an active role in imparting necessary service outputs, such as financial services, technological products, and hospitality services. Thus, according to theory, a firm should follow a rational approach of adopting only a limited variety of routes to reach its customers. But do firms follow this approach?
Empirical evidence indicates that more and more firms are adopting an increasingly broad variety of routes to market (Cespedes and Corey, 1990, Coughlan et al., 2006 and Frazier, 1999). Why do these firms choose a distribution strategy that appears irrational, disorderly, or, worse yet, cannibalistic? What are the forces responsible for this development?
The literature, especially the trade press, points to the evolving role of customers in a firm's distribution strategy as a major force for the adoption of a broader variety of routes (Friedman and Furey, 1999 and Wheeler and Hirsh, 1999). The leading arguments weave around growing customer demands for wider availability and greater convenience of purchase, greater variety in service outputs at the point of purchase, customization of service outputs, and postpurchase support. Because different routes to market provide different levels of such service outputs (e.g., product information, breadth of assortment, level of social interaction, hours of business, order size, ease of negotiation, credit availability, payment options, transaction security, delivery time, return policy, and postpurchase support), firms adopt a broader variety of routes to fulfill the varying customer needs. That is, instead of designing a distribution structure to address the concerns of the intermediaries, firms seem to be responding to customer demands.
The objective of this study is to explore the influence of (1) a firm's customer orientation and (2) the search behavior of its customers based on the variety of routes the firm adopts. We use primary data from four consumer industries that possess two important characteristics: First, service outputs are an inalienable component of the delivery process and the customer's purchase experience and, second, the route to market plays an active role in imparting these service outputs (as opposed to just enabling passive distribution). For example, financial services (large search and advice components) and power utilities (large search and risk components) qualify according to these criteria. Our results provide strong evidence that a firm's customer orientation influences the variety of routes used by the firm. In addition, the influence of customer search behavior is partially supported.
This study makes two contributions to channels of distribution research. First, it establishes customer-centric factors as antecedents for the adoption of a narrow or broad variety of routes. Although a highly important issue for firms, this area has been underresearched, and most existing research deems increased customer heterogeneity the major factor responsible for the use of a broader variety of routes. This study expands the set of antecedents by establishing the role of the firm's customer orientation and the customer's search behavior.
Second, we conduct this study in the context of consumer markets. Traditionally, empirical channel research has focused largely on industrial markets, but certain characteristics, such as the small number of customers, long-term relationships, and complex and time-consuming purchase processes, differentiate industrial markets from consumer markets. These characteristics indicate a potentially different set of forces at work during the delivery of consumer products and services (Frazier et al., 1990 and Rosenbloom, 1999). Although recognizably different from industrial markets, consumer markets have not been considered to the same extent in channel research.
