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Author: Vera Tilson Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In durable goods markets, such as those for automobiles or computers, the coexistence of selling and leasing is common as is the existence of both corporate and individual consumers. Leases to the corporate consumers affect the price of used goods on the second-hand market which in turn affect the buying and leasing behavior of individual consumers. The setting of prices (or volumes) for sale and lease to individual and corporate consumers is a complicated problem for manufacturers. We consider a manufacturer who concurrently sells and leases a finitely durable good to both individual and corporate consumers. The interaction between the manufacturer and consumers is modeled as a dynamic sequential game, where each player seeks to maximize its own payoff over an infinite horizon. We study how the corporate channel and substitutability of new goods and used goods affect the manufacturer's pricing decisions, consumer behavior and social welfare in the retail market. Making a number of simplifying assumptions including two-period lifetime for the finitely durable goods, we show that all individual consumers follow Markov Perfect consumption strategies and based on their individual willingness to pay choose one of four two-period product bundles. They either (1) lease a new product every period, (2) repeatedly buying a new good and use it for two periods, (3) always buy used goods, and (4) do not participate in the market. We show that when used goods are poor substitutes for new goods, as the manufacturer increases her leasing volume in the corporate channel, she optimally raises her leasing price to individual consumers, but may not necessarily adjust the selling price of new goods. As the retail lease price rises, retail consumers that prefer leasing experience a loss in surplus. However, aggregate consumer surplus increases with increase in corporate leasing. On the other hand, when used goods are close substitutes for new goods, with increased corporate leasing, the manufacturer stops leasing to individual consumers and raises retail sales prices.
Author: Vera Tilson Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In durable goods markets, such as those for automobiles or computers, the coexistence of selling and leasing is common as is the existence of both corporate and individual consumers. Leases to the corporate consumers affect the price of used goods on the second-hand market which in turn affect the buying and leasing behavior of individual consumers. The setting of prices (or volumes) for sale and lease to individual and corporate consumers is a complicated problem for manufacturers. We consider a manufacturer who concurrently sells and leases a finitely durable good to both individual and corporate consumers. The interaction between the manufacturer and consumers is modeled as a dynamic sequential game, where each player seeks to maximize its own payoff over an infinite horizon. We study how the corporate channel and substitutability of new goods and used goods affect the manufacturer's pricing decisions, consumer behavior and social welfare in the retail market. Making a number of simplifying assumptions including two-period lifetime for the finitely durable goods, we show that all individual consumers follow Markov Perfect consumption strategies and based on their individual willingness to pay choose one of four two-period product bundles. They either (1) lease a new product every period, (2) repeatedly buying a new good and use it for two periods, (3) always buy used goods, and (4) do not participate in the market. We show that when used goods are poor substitutes for new goods, as the manufacturer increases her leasing volume in the corporate channel, she optimally raises her leasing price to individual consumers, but may not necessarily adjust the selling price of new goods. As the retail lease price rises, retail consumers that prefer leasing experience a loss in surplus. However, aggregate consumer surplus increases with increase in corporate leasing. On the other hand, when used goods are close substitutes for new goods, with increased corporate leasing, the manufacturer stops leasing to individual consumers and raises retail sales prices.
Author: Saibal Ray Publisher: Springer Nature ISBN: 3030317331 Category : Business & Economics Languages : en Pages : 282
Book Description
This book aims to revisit the “traditional” interaction between channel strategies and the marketing mix in a connected world. In particular, it focuses on the following four dimensions in this context: Consumers, Products, Value Proposition and Sustainability. Keeping in mind the growing digitalization of business processes in the retail world and the move towards omni-channel retailing, the book introduces the state-of-the-art academic and practitioner studies along these dimensions that could enhance the understanding of the potential impact that new technologies and strategies can have on practice in the near future. When launching a new product/service to market, firms usually consider various components of the marketing mix to influence consumers’ purchase behaviors, such as product design, convenience, value proposition, promotions, sustainability initiatives, etc. This mix varies depending on the specific channel and consumer niche that the firm is targeting. But this book shows how channel strategy also influences the effectiveness in utilizing the marketing mix to attract potential customers.
Author: Preyas S. Desai Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
A large literature in economics and marketing studies the problem of manufacturer's designing contracts that give a retailer appropriate incentives to make decisions that are optimal from the manufacturer's point of view (see, for example, Spengler 1950, Jeuland and Shugan 1983, McGuire and Staelin 1983, Lal 1990, Rao and Srinivasan 1995, Desai 1997, among others). An important result from this literature is that the manufacturer can coordinate retail price decisions by choosing a two-part tariff in which the wholesale price equals the manufacturer's marginal cost and the fixed fee extracts all the rents from the retailer. In other words, the manufacturer sells the firm to the retailer for the fixed fee and, thus, eliminates the double-marginalization problem. Although this result is well established for non-durables, researchers have not analyzed the coordination issue for durable goods manufacturers who have the added complexity of competition from used goods in secondary markets. In this paper, we show how the coordination problem for a durable goods manufacturer is fundamentally different from the traditional coordination problem of a non-durables manufacturer. In particular, the durable goods manufacturer has to solve not only the coordination problem but also the time-consistency problem (see, for example, Coase 1972, Bulow 1982, Purohit 1995). Our objectives in this paper are to investigate whether or not the insights from the channel coordination literature, that has developed principally with non-durable goods in mind, are also applicable to durable goods. In order to do this, we develop a dynamic, two-period model in which a manufacturer sells its products to a retailer who sells the product to consumers. Products sold in the first period become used goods in the second period and compete with sales of new units. Starting from consumer utilities, we derive inverse demand functions for new and used goods and consider a number of different contracts between the manufacturer and the retailer. We start with a simple contract in which the manufacturer offers a wholesale price for a period at the beginning of that period. As one would expect, this contract does not solve either the channel coordination problem or the time-consistency problem. We then consider a number of two-part tariff contracts. Given the well-established results from the existing channel coordination literature, we begin with a contract in which the manufacturer offers per-period two-part tariffs in which all wholesale prices are set at marginal cost. We find that not only does this contract fail to achieve channel coordination, but the retailer sells a higher quantity than an integrated manufacturer would sell. This is in contrast to the traditional double marginalization problem in which the retailer sells a lower quantity than an integrated manufacturer would sell. We then allow the wholesale prices to be different from marginal costs. We show that using this more general two-part tariff contract, the manufacturer can achieve channel coordination. That is, the total channel profit is the same as the profit of an integrated seller. However, the equilibrium wholesale price in the first period is strictly above the marginal cost. Next, we consider a contract in which the manufacturer uses a single fixed fee, announced at the beginning of the first period. The per-period wholesale prices are still at the marginal cost level in this contract. This contract is identical to "selling the firm to the retailer" at the price of the fixed fee. Here we find that the contract can achieve channel coordination. However, the contract is not an equilibrium solution. In particular, the manufacturer increases wholesale prices to above marginal cost levels. Although some of the contracts above solve the double marginalization problem, none of them mitigates the time consistency problem. In order to solve both these problems, the contract must yield total channel profit equal to an integrated renter's profit. Because the renter does not have a problem with time consistency, an integrated renter earns the highest profits in a durable goods channel. We derive a contract that solves both of these problems. In this contract, at the beginning of period 1, the manufacturer writes a contract with the retailer specifying a fixed fee and two per-period wholesale prices, both of which turn out to be strictly above the marginal cost. Interestingly, with this contract, the manufacturer makes more money by selling through the retailer rather than selling directly to consumers. We contribute to the coordination literature by examining coordination issues in a dynamic, durable goods context and identifying a new coordination problem - unlike the traditional coordination models, a durable goods manufacturer may have to provide the retailer incentives to sell less rather than to sell more. Clearly, the traditional "selling the firm to the retailer," approach does not solve this new problem. We also contribute to the durable goods literature by showing how a durable goods manufacturer can sell its product and solve its time consistency problem. Effectively, this allows the manufacturer to earn the same profits as it would get if it could commit to prices or if it could rent its product. When committing to individual consumers or renting can only be achieved through additional costs, our solution is the optimal strategy for a durable goods manufacturer.
Author: Sreekumar R. Bhaskaran Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In spite of the fact that many durable products are sold through dealers, the literature has largely ignored the issue of how product durability affects the interactions between a manufacturer and her dealers. We seek to fill this gap by considering a durable goods manufacturer that uses independent dealers to get her product to consumers. In contrast to much of the literature, we specifically consider the possibility that if the manufacturer sells her product, then the dealers can either sell or lease it to the final consumer. One of our more interesting findings is that, when the level of competition among dealers is high, the manufacturer prefers to lease the product to her dealers, which forces them to lease to consumers. This complements existing results that show that when suppliers of durable goods interact directly with consumers, selling is the dominant strategy for high levels of competitive intensity. In addition, our results help to explain differences in the selling / leasing policies that are observed in the office equipment and automobile industries.
Author: Robert W. Palmatier Publisher: Routledge ISBN: 1315506440 Category : Business & Economics Languages : en Pages : 497
Book Description
For advanced undergraduate and/or graduate-level courses in Distribution Channels, Marketing Channels or Marketing Systems. Marketing Channel Strategy shows students how to design, develop, maintain and manage effective relationships among worldwide marketing channels to achieve sustainable competitive advantage by using strategic and managerial frames of reference. This program will provide a better teaching and learning experience—for you and your students. Here’s how: Bring Concepts to Life with a Global Perspective: Varied topics are covered, bringing in findings, practice, and viewpoints from multiple disciplines. Teach Marketing Channels in a More Flexible Manner: Chapters are organized in a modular format, may be read in any order, and re-organized. Keep your Course Current and Relevant: New examples, exercises, and research findings appear throughout the text.
Author: Ngan Ngoc Chau Publisher: ISBN: Category : Languages : en Pages : 184
Book Description
When purchasing durable goods, consumers not only pay for current but also future consumption; consequently, forward looking behavior is an important consideration in durable goods markets. For example, anticipating that prices will go down in the future, consumers may delay the purchase today; such behavior has a significant impact on the firm's marketing strategies. This dissertation investigates the impact of durability on two marketing strategies: new product introductions and supply chain design. The first part of this dissertation (Chapter 3) examines a durable goods manufacturer's new product introduction strategy under different market environments where network effects and product compatibility are important. More specifically, this part explores the incentives of a firm to use either a replacement strategy or a skipping strategy--in the former, the firm commercializes the existing technology, while in the latter, it does not; in either case, an improved technology will be available in the future and the firm will introduce a new product at that time. Using a two-period analytical model with network effects, the analysis shows how the level of improvement in the new product, along with the type of compatibility between the products, interacts with network strength to determine the manufacturer's optimal strategy. Under gradual new product improvement, there is a strict preference for replacement. In contrast, under rapid new product improvement, that preference only holds in markets with relatively high levels of the network strength; at lower levels of the network strength, skipping is preferred; interestingly, for moderate values of the network strength, the level of product improvement affects the manufacturer's optimal choice differently under varying types of compatibility. The second part of this dissertation (Chapters 4 and 5) focuses on the supply chain design decisions of a durable goods manufacturer who is a sole supplier of an essential proprietary component for making the end product. Three different supply chain structures are considered. In the first, the manufacturer operates as a "component supplier" and sells the component to a downstream firm who then makes the end product. In the second structure, the manufacturer produces the end product using its component but does not make that component available to any other firms; here, the manufacturer operates as a "sole entrant". Finally, the manufacturer can operate as a "dual distributor" who not only makes the end product using its own component, but sells the component to a downstream firm who then competes against the manufacturer in the end product market. The extant literature on the optimal choice among the above supply chain structures has focused mainly on static settings in a framework of price competition. By contrast, researchers predominantly use quantity competition to examine durable goods markets in dynamic (i.e., multiple time period) settings. Moreover, the literature notes diversity in optimal firm behavior under the two types of (i.e., price and quantity) competition. Therefore, to transition from supply chain design in a static setting to a more dynamic one where consumers are forward-looking, this part utilizes Chapter 4 to analyze the manufacturer's choice using quantity competition in a static setting. This analysis (in Chapter 4) identifies precisely the shift in the manufacturer's choice of supply chain structure when moving from price competition to a quantity competition framework. With that analysis as a benchmark, the next chapter focuses on the manufacturer's choice in a dynamic setting. More specifically, Chapter 5 investigates the impact of durability on the optimality of the supply chain structures identified above. Using a two period setting, the analysis explores how the manufacturer's preference for different supply chain structures is modified. The findings reveal that, e.g., when durability is taken into account, the manufacturer's preference for the sole entrant role goes up, while the preference for the component supplier role goes down. Further, under certain conditions, the manufacturer may opt to be a dual distributor in the first period and then choose to become only a component supplier in the second period. The underlying rationale for such shifts in preference is directly linked to durability, which creates future competition and substantially reduces the manufacturer's profitability in the long run. Interestingly, this negative impact varies across different supply chain structures. Overall, this dissertation contributes to the current literature on durable goods and enhances our understanding of the impact of durability on the optimality of distinct marketing strategies, and provides insights that are valuable to both academics and managers.
Author: Livio Moretti Publisher: Springer ISBN: 3319919598 Category : Business & Economics Languages : en Pages : 223
Book Description
This unique book helps business executives to improve their company's business performance by showing how to build an effective and future-proof distribution channel, and adopt effective commercial policies and value-based pricing strategies. For the first time, an ex-McKinsey consultant and general manager reveals the methodology adopted by successful Fortune 100 multinationals, offering readers a concise, informative and pragmatic guide to the core principles, with an abundance of concrete examples and visual frameworks. Every good business manager needs to have a microscope on one eye and a telescope on the other eye – this practical, easy to follow book, anchored in solid analytic principles, allows for fast and solid transitions between diagnosis, long-term strategic thinking, and short-term execution. Bruno Barcelos, General Manager Sandoz, a Novartis Company
Author: Linda Gorchels Publisher: McGraw Hill Professional ISBN: 0071442952 Category : Business & Economics Languages : en Pages : 239
Book Description
Channel management has become one of the most important components of a firm's competitive strategy, with mistakes often costing companies millions--and channel managers their careers. The Manager's Guide to Distribution Channels provides managers and decision makers with proven tools and go-to-market strategies for refining channel strategies and managing distribution relationships. Self-assessment tools combine with realworld cases and examples to give managers a nontheoretical, balanced blend of thought-provoking insights and hands-on tactics.
Author: Kusum L. Ailawadi Publisher: John Wiley & Sons ISBN: 1119632889 Category : Business & Economics Languages : en Pages : 387
Book Description
Getting Multi-Channel Distribution Right provides a comprehensive treatment of modern distribution strategy that is analytically solid, clearly written, and relevant for managers as well as MBA and executive MBA students, and the professors who train them. It covers concepts, metrics, tools, and strategic frameworks for managing distribution in physical and digital channels. Focusing on the challenges of managing multiple channels of distribution in an evolving marketplace—rather than the process of designing a distribution channel from scratch—it leans more heavily on metrics and tools and incorporates perspectives from academic research, as well as in-depth case studies from marketing and general management practice. Introduces an organizing framework of pull and push marketing for how suppliers work together with their channel partners. Integrates across physical and digital, independent and company-owned, routes to market. Maps the functions of traditional and newer intermediaries in the channel ecosystem and identifies the root causes of conflict between them. Provides tools and frameworks for how much distribution coverage is required and where. Shows how product line, pricing, trade promotions, and other channel incentives can help to coordinate multiple channels and manage conflict. Illustrates how push and pull metrics can be combined into valuable dashboards for identifying positive feedback opportunities and sustaining the channel partnership. With the help of Getting Multi-Channel Distribution Right you’ll discover how to successfully develop, execute, and adapt distribution strategy to the evolving marketplace.
Author: Vera Tilson
Author: Vera Tilson
Author: Saibal Ray
Author: Preyas S. Desai
Author: Sreekumar R. Bhaskaran
Author: Robert W. Palmatier
Author: Ngan Ngoc Chau
Author: Andre P. Calmon
Author: Livio Moretti
Author: Linda Gorchels
Author: Kusum L. Ailawadi