Abstract
This article studies the cooperative advertising problem of a two-period online supply chain consisting of a manufacturer and an online retail platform. The manufacturer provides national advertising in the first period to build the brand image and increase the awareness of the product. And the online retail platform provides platform advertising for selling the product to consumers on its platform during two periods. The manufacturer and the online retail platform may choose different cooperative advertising strategies for national advertising and platform advertising, which are one-way subsidy strategy, two-way subsidy strategy, and revenue-share strategy. We formulate a Stackelberg game model to study the cooperative advertising problem by taking price and advertising effect into account and analyze how the profit is influenced in different cooperative advertising strategies. We find that under the revenue-share strategy, the manufacturer provides a higher subsidy rate for the online retail platform advertising than that in other cooperative advertising strategies. Interestingly, there are conditions where, while just the manufacturer contributes a percentage of the platform advertising and the online retail platform has no effort on the national advertising, the total profit would be better than that in revenue-share strategy even in revenue-share strategy, the cooperative relationship is closer between the manufacture and the online retail platform.
Highlights
Cooperative advertising is a powerful tool commonly used in marketing channels where one party in the channel agrees to subsidize the advertising expenditure of the other [1]
We attempt to address these issues in this paper; we develop a two-period online supply chain system consisting of a manufacturer and an online retail platform
Different from previous models, this paper considers that the impact of national advertising, platform advertising, and product price on demand is changing over time, and this naturally divides the selling season into two periods. e manufacturer sells his product through the online retail platform and chooses different levels of national advertising. e online retail platform sells the product to consumers and chooses different levels of platform advertising. e manufacturer and the online retail platform may choose different cooperative advertising strategies for national advertising and platform advertising, which are one-way subsidy strategy, two-way subsidy strategy, and revenue-share strategy
Summary
Cooperative advertising is a powerful tool commonly used in marketing channels where one party in the channel agrees to subsidize the advertising expenditure of the other [1]. Under the revenue-share strategy, manufacturers could be motive to spend more on adverting and reduce the wholesale price because they could get a portion of online retail platforms’ sales profit, and online retail platforms may benefit from the advertising and the lower wholesale price even if they must share their revenue with manufacturers in the retail market Based on these observations, we are interested in the following questions. E manufacturer and the online retail platform may choose different cooperative advertising strategies for national advertising and platform advertising, which are one-way subsidy strategy, two-way subsidy strategy, and revenue-share strategy. Rid, by identifying the value of the cooperative advertising, the manufacturer and the online retail platform just taking a two-way subsidy strategy is the best choice for the online supply chain system.
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