The value of membership service sharing in the e-commerce marketplace

Abstract

Many firms have introduced membership programs as an important customer service initiative. However, little research has focused on how to enforce e-commerce retailing through membership service sharing. To explore the value of membership service sharing in e-commerce retailing, we build a game-theoretical model in which the brand decides whether to enable e-commerce retailing through online direct selling, and then all participants determine whether to engage in membership program sharing. Our findings show that in the case with a low consumer acceptance to the e-commerce channel, the brand will enter the downstream market if the entry cost and product cost are low, or the entry cost is low and the unit cost of the product is very high. One of the interesting findings is that the brand might fall into the encroachment trap when the product cost is moderate. Meanwhile, improving consumer acceptance of the e-commerce channel or the ratio of point exchange are effective ways to escape this trap. Moreover, when consumers are more willing to accept the e-commerce channel, the brand will adopt an e-commerce retailing strategy if the entry cost is low. Also surprisingly, our study shows that the brand would be better off from membership service sharing if the product cost is moderate, or very high, while the retailer would be worse off. Furthermore, when the unit cost of the product is moderate, membership program sharing has a remarkable impact on the brand’s retailing strategy. In addition, we also make some extensions to verify the robustness of the core model.