The Optimal Online and Offline Channel Strategy when Customers have Different Use Occasions
Date Issued
2009
Date
2009
Author(s)
Tseng, Te-Chang
Abstract
This paper analyzes the optimal targeting strategies of a monopolistic marketer for its online and offline distribution channels. Unlike offline traditional distribution channels, online distribution channels make it possible for consumers to save their transportation costs. However, when purchasing online, consumers cannot obtain the interactive presale services they can efficiently obtain when purchasing offline. Unlike previous literature on multi-channel strategies, this paper considers consumer different needs for presale services under different use occasions.his paper develops a game-theoretic framework and examines how consumers’ different needs for presale services in different use occasions may influence the optimal online and offline channel strategies. We consider two types of consumers, high-valuation and low-valuation ones. We assume consumers who have higher valuation for the product also have higher valuation for presale services. Furthermore, the same type consumer might have different valuations for the services under different use occasions. We take self-use and gift-buying as our two representative use occasions. Consumers when buying products for their own use might value presale services more than when buying them as gifts.he results show that the optimal channel strategy depends on the relative frequency of two different use occasions and the relative proportion of the two-type consumers. Furthermore, we have the following results: (1) Whether it is feasible to segment the market by use occasions and induce consumers in gift-buying occasion to purchase online crucially depends on whether high-valuation consumers under gift-buying occasion have lower valuation for presale services than low-valuation consumers under self-use buying occasion. (2) On the other hand, if low-valuation consumers in self-use occasion value presale services more than high-valuation ones in the gift-buying occasion, then the higher the frequency of gift-buying occasion relative to that of self-use buying, and the lower the percentage of low-valuation consumers relative to high-valuation ones, the more likely it is optimal for the firm to segment the market by use occasions. (3) Focusing only on user types and not distinguishing different use occasions of consumers, the firm does not take advantage of the features of different distribution channels to help price discriminate consumers.
Subjects
Channel Price Discrimination
Dual Channel
Use Occasion
Type
thesis
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