Clicks versus Bricks: the role of durability in marketing channel strategy of durable goods manufacturers

توضیحات

ABSTRACT

We develop a two-period dual-channel model for a durable goods manufacturer to investigate how product durability and the channel structure create strategic issues that are significantly different from those in managing a dual channel for nondurables. The manufacturer can sell directly by its own e-channel and indirectly via an independent reseller. Our game-theoretic model nests Arya et al. (2007) [Arya et al., 2007. The bright side of supplier encroachment. Marketing Science 26 (5): 651-659.] as a special case when product durability reduces
to zero and thus generalizes it to the durable goods setting. The equilibrium solutions indicate that, when the product is durable, both parties’ profitability strongly depends on product durability and direct selling cost. In particular, we find that, compared to encroaching the reseller’s market by direct selling online, it is optimal for the  manufacturer to open an inactive e-channel that serves only as an information medium. Moreover, we find that,  contrary to Arya etal.’s (2007) results, if product durability is moderate, for any direct selling cost, manufacturer’s encroachment is always detrimental to the reseller, and thus its bright side disappears. We test our model’s  theoretical predictions of the effectsof product durability on manufacturer’s and reseller’s profitability with data
from the U.S. x86 computer server market, and find strong empirical supportprofitability of both parties is higher when product durability is sufficiently low or sufficiently high, and lower when durability is intermediate.

INTRODUCTION

Many durable goods manufacturers, including Lenovo, HP, Epson and IKEA, have adopted dual channels to market  their products (Lenovo 2016, Hewlett Packard, Epson 2016, IKEA 2016). Durable goods pose a number of questions that are quite different from those in nondurable goods marketing (Desai and Purohit 1998, 1999). For example, when facing encroachment from an upstream agent (manufacturer), a downstream agent (reseller) of durable goods is in a more difficult position than the reseller of nondurable goods because with durable goods, the reseller is not only essentially competing with the new products from the manufacturer today .but also dealing with .the used units tomorrow

Year: ۲۰۱۸

Publisher : ELSEVIER

 By : Wei Yan, Yu Xiong, Junhong Chu, Gendao Li, Zhongkai Xiong

File Information: English Language/ 34 Page / size: 1.09 MB

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سال : ۱۳۹۶

ناشر : ELSEVIER

کاری از : وای یان، یو Xiong، Junhong چو، Gendao لی، Zhongkai Xiong

اطلاعات فایل : زبان انگلیسی / 34 صفحه / حجم : MB 1.09

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