Quantity Discount under Price and Service Competition – A Generic Brand Incentive Policy for Retailer Efforts
Date Issued
2008
Date
2008
Author(s)
Caw, Eunice Sy
Abstract
This study develops an incentive policy in the form of quantity discount that takes into consideration retailer service efforts. In observing the behavior and interaction of manufacturer–retailers–customers, a quantity discount under price and service competition is proposed. The discount policy is constructed under a non-exclusive territory distribution channel of Generic Brand products with a single manufacturer and differently-sized heterogeneous retailers. Each retailer faces price and service sensitive demand in carrying both Name Brand and Generic Brand replacement parts. The importance of smaller-sized retailers is acknowledged and manufacturers discretely allow quantity discount incentive in motivating its retailers to provide an appropriate contribution for customer satisfaction or preference shifting. It was shown that when the manufacturer considers retailer effort in establishing a quantity discount policy and it pre-commits its wholesale prices to a set of heterogeneous retailers, an optimum solution can be determined under concave profit function conditions. By modifying its discount policy, the manufacturer is able to target both price and service effects as well as take advantage of an inherent characteristic of small retailers which is flexibility in personal services. In addition to larger earnings of retailers, Generic Brand manufacturers also realize improved overall profits and customer perception on its products.
Subjects
Generic Brands
Quantity Discount
Incentives
Sales Effort
Price and Service Competition
Type
thesis
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ntu-97-R94546031-1.pdf
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