Making channel incentives work: A discriminating match framework

Abstract Suppliers using independent resellers are vulnerable to low compliance and frequent opportunistic behaviors. We expand predominant attention to monetary incentives to motivate independent resellers in two ways. First, we propose that a supplier needs to achieve alignment on two issues: Aligning reseller actions with its actions through coordination mechanisms and aligning reseller interests with its interests through monetary incentives. Second, we propose and test the logic of a discriminating match between the two facets of monetary incentives (magnitude and immediacy) and two coordination mechanisms (monitoring and improvisation). We propose that it is a discriminating match between an incentive facet and a coordination mechanism that enhances compliance and suppresses opportunistic behavior. Conversely, a mismatch between the two negatively affects reseller outcomes. Analysis results of data from 198 mobile phone resellers in South Korea support our predictions.