Research on Manufacturers’ Referral Strategy Considering Store Brand Retailers and Traditional Retailers

Abstract

It has become a common commercial phenomenon for retailers to establish their own brands. The manufacturer referral strategy is studied through a model which includes a manufacturer, a traditional retailer and a store brand retailer. We conduct research on the three cooperation methods of the manufacturer: “no information referral”, “exclusive referral” and “nonexclusive referral”. The equilibrium wholesale price, the manufacturer’s order quantity and the retailer’s own product output are studied by constructing game models, and the best referral cooperation choice between the manufacturer and the retailer is analysed according to their profit. The results show that the manufacturer’s referral level choice does not change the number of products, while the manufacturer’s market loss rate leads to a change in product order quantity among different choices. Under the combined effect of the market loss rate and the intensity of market competition, the store brand retailer will change the output decision of its own products. When the market loss rate meets a certain range, the manufacturer’s product sales can be maximized. For the manufacturer, any referral strategy is better than no referral strategy, and in most cases, the manufacturer prefers nonexclusive referrals. The traditional retailer is willing to accept the manufacturer’s referral cooperation, and the traditional retailer’s profit is better under the nonexclusive referrals; while most store brand retailers are willing to choose the nonexclusive referrals.