Channel strategies for dual-channel firms to counter strategic consumers

Abstract

Nowadays some giant firms have attempted to sell products through different channels over different periods to mitigate channel conflict. This paper considers a dual-channel firm who has access to online/Clicks (C) and offline/Bricks (B) channels in the presence of strategic consumer behavior. We focus on the two-period selling setting where the firm could sell products through one of these channels in each period and mainly investigate four channel structures: (1) selling products through the pure online channel over two periods (Channel CC); (2) selling products first through the online channel and then through the offline channel (Channel CB); (3) selling products through the pure offline channel over two periods (Channel BB); (4) selling products first through the offline channel and then through the online channel (Channel BC). The main novelty of this paper is twofold. Theoretically, this study develops four intertemporal channel operations models and explores the optimal pricing and channel strategies for dual-channel firms over two periods by considering strategic consumers. Practically, the research results suggest that dual-channel firms should adopt the preannounced pricing strategy instead of the dynamic pricing strategy in terms of countering strategic consumers. More importantly, Channel CB can be used as a tactic to effectively alleviate consumers’ strategic consumer behavior. Specifically, when the differentiation between the online and offline channels is relatively high, Channel CB is performing better than Channel BB, and vice versa.