Cooperative advertising to induce strategic customers for purchase at the full price

Abstract

In this paper, cooperative advertising in a manufacturer–retailer supply chain in the presence of the strategic customer is studied. It is assumed that a proportion of the customers strategically postpone their purchase in order to achieve a higher surplus. Advertising can enhance the willingness to pay (WTP) of the customers and, as a result, their surplus. In this paper, the effect of cooperative advertising in order to induce customers for early purchase is analyzed. While customer purchasing in the full price leads to higher income for the retailer, it requires spending more on advertising. This trade‐off between the benefits of inducing customers to early purchases and the advertising expenditure is a key to understanding the retailer's optimal advertising decision. On the other hand, it is interesting for the manufacturer to find out when supporting the retailer for its advertising expenditure is beneficial. Nash and Stackelberg (manufacturer as a leader) game‐theoretic models are established to investigate whether, in the channel, it is optimal to induce customers by increasing advertising expenditure or not. Results of the Stackelberg game show that the manufacturer participates in the retailer's advertising expenditure only if it leads to early purchasing of the strategic customers and the participation rate depends on the wholesale price. From the retailer's point of view, when the impact of advertising on the WTP of customers is not significant, the more the proportion of strategic customers, the more inducing customers for early purchase is beneficial. When advertising effectively increases WTP, regardless of the fraction of strategic customers, it is beneficial for the retailer to enhance its advertising in order to dissuade customers from postponing their purchase.

Manufacturer warranty service outsourcing strategies in a dual‐channel supply chain

“…We adopt a manufacturer‐Stackelberg leader game for all scenarios, since she has a higher channel power than the other supply chain members (Cai, ; Li et al., ; Farshbaf‐Geranmayeh et al., ), such as IBM and Apple have the ability to open a direct channel, as well as the power to set wholesale price. Retailers and third parties must follow the manufacturer's wholesale price and then determine the warranty service and the retail price.…”

Quick response and omnichannel retail operations with the ship‐to‐store program

“…Our work also considers strategic consumer behavior (Su and Zhang, 2008; Zhou et al., 2018; Farshbaf‐Geranmayeh et al., 2019), which draws much attention from operations management researchers. Many related papers (Song and Zhao, 2017) assume that consumers strategically time their purchases for better prices to maximize their surplus.…”

The impact of consumer behavior on preannounced pricing for a dual‐channel supply chain

“…Farshbaf‐Geranmayeh et al. (2019) analyzed the effect of cooperative advertising in order to induce strategic consumers for early purchase in full‐price period. All of the abovementioned papers do not recognize the possible relationship between the market demand of every selling period and the behaviors of consumers toward buying products.…”