Reselling or marketplace channel? A manufacturer’s strategic decisions for differentiated brands considering channel’s service level

Abstract

Brand differentiation is an effective strategy commonly used by large-scale brand manufacturers to produce multiple brands of a particular product type. To avoid undesirable inter-brand competition, a brand manufacturer prefers to adopt multiple online sales channels (OSCs) with different channel’s service levels provided by the online retailer in selling such differentiated brands. Considering both brand and channel’s service differentiation, this joint decision of the brand manufacturer and online retailer achieves the coordination of retail supply chain. Our study is based upon a model that consists of a responsible brand manufacturer(he) that aims to maximise profits and enhance consumer surplus (CS). He offers two brands with differentiated consumer acceptances, a premium and an economy brand. Also, he chooses between two OSCs (a reselling and a marketplace channel) to provide different levels of services. The brand manufacturer’s OSC strategies are investigated according to the interplay between brand and service differentiation, and profits and CS, respectively. The results show that the brand manufacturer prefers differentiated OSCs for two brands as service differentiation decreases. Also, at low brand differentiation and alternatively, high brand differentiation and low service differentiation, the brand manufacturer and consumers show different OSC preferences. Finally, a case study is performed to validate our results.