Channel selection in e-commerce age: A strategic analysis of co-op advertising models
Abstract: The purpose of this
paper is to develop and compare two co-op advertising models: advertising model
under traditional channel and co-op advertising model under dual channel, to
select optimal channel structure to sell products for manufacturer and to
derive optimal co-op advertising strategies for the manufacturer and the
retailer.
Design/methodology/approach: Stackelberg game theoretical is used to
develop two co-op advertising models: co-op advertising model under traditional
channel and co-op advertising model under dual channel. Then we compare the two
models to select optimal channel structure to sell products for manufacturer
and to derive optimal co-op advertising strategies for the manufacturer and the
retailer. Furthermore, we analyze the impact of product web-fit on these
optimal strategies and illustrate by some numeral examples. Based on our
results, we provide some significant theories and managerial insights, and
derive some probable paths of future research.
Findings: We provide a framework for researching optimal co-op
advertising strategies in a two-level supply chain considering different
marketing channel structures. First, we discuss the traditional channel co-op
adverting model and the dual channel co-op advertising model based on
Stackelberg game theoretical, and we derive optimal co-op advertising
strategies. Next, comparisons of these two channel structures are discussed and
we find that the manufacturer always benefits from dual channel. But the
retailer not always benefits from dual channel structure, and dual channel
structure is better than retail channel with certain conditions. Also, the
optimal co-op advertising strategies for the manufacturer and the retailer are
obtained.
Research limitations/implications: First, we focus on the aforementioned two
channel structures; a further comparison with other channel structures can be
investigated. Second, we ignore some factors that influence the demand of
product, such as service and price. We can do some researches from the point of
these factors. Third, how demand uncertainty affects the channel selection and
co-op advertising strategy is another interesting research item.
Practical implications: The manufacturer and the retailer know that the
impact of co-op adverting on the demands of traditional channel and direct
channel, both would like to choose reasonable strategies to improve the channel
coordination. Therefore, it would be best if business managers conduct market
survey before they start their co-op advertising campaign.
Originality/value: Two new co-op advertising models in E-commerce age are
developed, and the impact of product web-fit on these optimal strategies are
analyzed and illustrate by some numeral examples. In addition, optimal channel
structure in E-commerce age are selected for manufacturer and the retailer.
Keywords: traditional channel,
dual channel, channel selection, co-op advertising strategy, Stackelberg game
Author: Yongmei Liu, Yuhua
Sun, Junhua Hu
Journal Code: jptindustrigg130057
