Optimal Sales Strategies for Dual Channel under Cooperation and Competition Considering Customer Purchasing Preference

Abstract

For product sales under a dual channel (DC) comprising a retail channel (RC) and a direct online channel (DOC), it is necessary to consider customers’ purchasing behaviors and preferences. This paper proposes the optimal sales strategy for DC under the situation where customer purchasing preference is unknown. This paper discusses three types of customers: (i) customers who prefer purchasing a single type of products in RC, (ii) customers who prefer purchasing them in DOC, (iii) indecisive customers who purchase in either RC or DOC. A retailer runs RC and determines the optimal retail price. A manufacturer runs DOC and determines the optimal direct online price. This paper assumes that each channel faces price-dependent demand. Two sales strategies are compared: the cooperated sales strategy (COSS) and the competed sales strategy (CMSS). Under COSS, a retailer and a manufacturer determine their prices cooperatively. Under CMSS, they determine their prices competitively. Using numerical examples, how (i) the uncertainty in customer purchasing preference, (ii) the existence ratio of indecisive customers, (iii) the sensitivity of demand by the difference between the retail price and the direct online price and (iv) the decrease ratio of the product demand for the increase in price, affect the optimal decisions under COSS and CMSS.