Consumer Perceived Importance of Channel Authorization: A Post Hoc Segmentation Approach to Dealing with Gray Markets

Gray markets have long raised problems for international firms. From the consumer's perspective, the major difference between a gray market and a white market is channel authorization. However, there is no research yet that addresses consumer perceived importance of channel authorization. This study uses conjoint analysis to investigate empirically consumer perceived importance of channel authorization. Furthermore, a two-stage post hoc segmentation approach is suggested to segment and identify potential gray-market customers, and thus help brand managers address gray-market problems. Our results show that channel authorization is important to most consumers. The partial utility of channel authorization of durable goods seems to be higher than that of non-durable goods. For both durable and non-durable goods, potential gray-market customers seem to be less frequent users, less familiar with the product, and have lower income. Having identified the characteristics and preferences of consumers in various segments, brand managers are more able to tackle the threat of gray markets.