Less Is More - Category Captainship, Brand Importance and In-Store Marketing

Category captainship is the delegation of category management responsibilities to one of several suppliers in the category. Currently there is a debate on the benefits of category captainship to the different stakeholders within the supply chain. There are several important questions that arise in the implementation of category captainship. Which manufacturer should be selected, and how, as the category captain (CC)? What role do brands play within this process? Which stakeholders within the supply chain benefit from category captaincy? In this presentation we develop a game theoretic model to answer some of these questions. In particular, we develop a bidding mechanism for the selection of the CC and analyze the resulting model to understand the importance of brand strength, the role of in-store marketing activities (IMA), and the effect of brand loyal consumers. We show that the use of a bidding mechanism gives the retailer an extraordinary ability to corral profits because the manufacturers are trapped in a prisoner's dilemma. We identify conditions under which a retailer should delegate pricing and IMA to a CC. Finally, we consider the effect of category captainship on consumer welfare.