Coupon strategies for competitive products in an omnichannel supply chain

Abstract

This paper develops a game-theoretic model to investigate the optimal price and coupon promotion strategies in an omnichannel supply chain. The manufacturer sells competitive products via the BOPS (Buy Online, Pick-Up In-Store) channel and the retailer’s offline channel. Four coupon distribution models are investigated and compared, that is, non-coupon, coupons only offered by the manufacturer or the retailer, and coupons offered by the manufacturer and retailer simultaneously. We find that the distribution of coupons leads to increasing prices. However, coupon promotion does not necessarily lead to profit improvement, and it happens only if the product information in the channel is high enough. We also find that the most profitable case is the manufacturer and retailer implementing coupon promotion unilaterally. Facing the manufacturer’s promotion, the retailer conducting coupon promotion may be uneconomic. Conversely, in the presence of retailer promotion, the manufacturer can derive increasing profit with coupon promotion. Additionally, the manufacturer should endeavor to capture consumers who show a product preference, whereas the retailer should target consumers who show a channel preference.