Abstract
Consumers may need help using an inherently complex or information-intensive product after purchase. This paper studies the incentive for a manufacturer or a retailer to invest in pre-sales service effort that would reduce the consumer's likelihood of seeking after-sales support. Because providing pre-sales and after-sales support would incur costs for the provider, it is not evident whether the manufacturer or the retailer would be more effective in doing so, and whether both services should be provided by the same firm. We consider different models in which the pre-sales service and the after-sales support is provided by the same or different firms, and show that the service configuration in which both pre-sales service and after-sales support is provided by the retailer is desirable to both the retailer and the manufacturer. Interestingly, in this service configuration, although the pre-sales service is provided at the highest level among all configurations, consumers can show up in the largest numbers to seek after-sales support. We also study the possibility of the firms collaborating in providing pre-sales service, by allowing the manufacturer to share a portion of the retailer's cost of providing pre-sales service. As expected, if the manufacturer provides the after-sales support, cost-sharing by the manufacturer may increase both channel members' profits. However, if the retailer provides after-sales support, cost-sharing by the manufacturer helps increase the manufacturer's profit but, surprisingly, reduces the retailer's profit. In this case, the overall channel can still be better off, and as such, the manufacturer may be able to implement cost-sharing by providing an appropriate transfer to the retailer