Full Market Coverage Research Articles

Pricing and quality strategies for an on-demand housekeeping platform with customer-intensive services

In this paper, we study an on-demand housekeeping platform in which suppliers have heterogeneous opportunity costs, and customers are sensitive to service quality, price, and waiting time. The platform charges fees from customers and divides revenue with service suppliers in a certain proportion. We analyze two types of market coverage, namely full market coverage and partial market coverage. We find that as the potential demand market capacity expands, the platform will choose to lower prices to attract more customers and service suppliers until it reaches the partial market, thereby obtaining higher revenue, and suppliers will provide lower quality services to serve more customers and thus obtain more wages. Moreover, we show that the partial market is more favorable to the platform than the full market. However, for service suppliers, the partial market is not always more favorable. Meanwhile, as customers are more sensitive to the service value, suppliers will tend to lower their service rates to improve service quality, and the platform will tend to set higher service prices. Interestingly, we observe that when the sensitivity of service value is relatively small, the sensitivity of service value has even the opposite effect on the platform’s revenue and service suppliers’ payoffs, as well as the equilibrium number of service suppliers in different market scenarios. In addition, different market scenarios also will lead to the opposite effect of the service cost on the optimal equilibrium price, arrival rate, and service rate. However, the increase in the service cost will lead to a decrease in platform revenue and service supplier payoffs and the number of service suppliers in both market scenarios.

Political Marketing Prabowo Subianto and Sandiaga Salahuddin Uno in the 2019 Presidential Election

This research explains how the political marketing of Prabowo Subianto and Sandiaga Salahuddin Uno was conducted in the 2019 presidential election. This study uses a qualitative approach, and data collection methods use in-depth interviews and documentation. The results showed that Prabowo-Sandiaga tried to maximize all stages of their political marketing concept, nevertheless the political marketing concept carried out by Prabowo-Sandiaga had not yet had a good impact on the final results in the 2019 presidential election. On the other hand, all the stages of the political marketing concept carried out by Prabowo-Sandiaga in the 2019 presidential election slightly increased the total votes if compared to the total votes obtained in the previous presidential election. The stages of political marketing carried out by Prabowo-Sandiaga in the 2019 presidential election started with Segmentation, Targeting, Positioning, and Political Marketing Campaign Strategy. Prabowo-Sandiaga has several political segmentations which are then given a focus on political targets with patterns full market coverage. Prabowo-Sandiaga has a positioning on issues such as: Welfare, Justice, Prosperity. The positioning strategy pattern used is the rationalization strategy. Political marketing campaign strategy carried out with push political marketing, pull political marketing, and pass political marketing.

M-Payments, Financial Inclusion, and Full Market Coverage

M-Payments, Financial Inclusion, and Full Market Coverage

Product line design with vertical and horizontal consumer heterogeneity: the effect of distribution channel structure on the optimal quality and customization levels

Purpose The purpose of this study is to analyze the problem of optimal product line design in marketing channels where consumers are heterogeneous in both horizontal and vertical dimensions. Design/methodology/approach This paper develops a model to evaluate when it is preferable for a firm to extend the product line in a vertical or horizontal direction. Consumers are modeled as being vertically heterogeneous with respect to their valuation of quality and horizontally heterogeneous with respect to their preference on the esthetic component of the product. These model characteristics allow us to consider a broader set of product line extension strategies. By considering both a vertically integrated channel and a decentralized channel, this study investigates how channel structure influences optimal product line design. The problem with supplemental numerical analyses is mathematically analyzed. Findings The analysis shows that a horizontal product line extension strategy that offers the customized product can be used as an alternative to a vertical product line extension strategy. If the fixed cost is not too high, offering the customized product with low quality may be preferred to the quality-based segmentation strategy. Furthermore, the analysis shows that the channel structure is influential as the preference for the horizontal product line extension strategy is more pronounced in the decentralized channel than in the centralized channel. Research limitations/implications The analysis presented in this paper is limited by the consideration of full market coverage. Further research is needed to see how the results can be generalized to the case with partial market coverage. Practical implications The analysis suggests that a firm may consider product customization as part of its product line strategy. Information regarding market characteristics and channel structure is important when deciding on the optimal product line design. Originality/value The model reflects a more realistic marketing strategy and channel structure than previous studies that typically consider product line extension in only one direction and focus on the centralized distribution channel. Combining the standard product line extension and customization strategies also represents an important contribution to the literature. These extensions produce interesting new results and insights into a firm’s optimal product line design strategy.

Balancing growth, profitability and safety in the German insurance market

The contribution of this paper is to provide an improved understanding of the relationship between the three strategic objectives growth, profitability and safety of insurance companies in Germany. Extending on the work by Eling et al (2017), we introduce measures and provide descriptive statistics for each objective. Our numerical analysis relies on panel data of German insurers for the years from 2001 to 2016 providing almost full market coverage. We apply different statistical tests and multilinear regression models to test how and to what extent the objectives are related. At the same time, we control for the legal status, the size of the insurance business and the calendar year. Regarding the total insurance market, our results suggest a positive and significant relationship between growth and profitability and a negative significant one between the safety level and profitability. Further, mutual and public insurers relate to lower growth and higher safety levels than listed companies. For the business volume, we find that larger companies tend to grow at a lower rate when compared to smaller companies while achieving higher profitability but lower safety levels. The results per business line show that life insurers yield significantly different results from non-life insurers. Thus, we separately analyze and discuss the results for the life and the non-life sectors.

A Note of Caution on Using Hotelling Models in Platform Markets

We study a Hotelling framework in which customers first pay a monopoly platform to enter the market before deciding between two competing services on opposite ends of a Hotelling line. This setup is common when modeling competition in Internet content provision. We find that standard taken-for-granted solution methods under full market coverage break down, and that in the unique full-coverage equilibrium, the competing service providers set substantially lower prices. Standard methods and prices are restored by giving service providers the first move.

A Dynamic Model of Repositioning

Consumer preferences change through time and firms must adjust their product positioning for their products to continue to be appealing to consumers. These changes in product positioning require fixed investments such that firms reposition only occasionally. I construct a model that can include predictable and unpredictable consumer preference changes, and where a firm optimally repositions its product given the current market conditions, and expected future repositionings. When unpredictable consumer preferences evolve away from a current firm’s positioning, the decision to reposition is like exercising an option to be closer to current consumer preferences, or waiting to reposition later or for those preferences to return so as to be closer to the firm’s current position. We characterize this optimal repositioning strategy, how it depends on the discount factor, variance of preferences, and repositioning costs. I compare the optimal policy of the firm with what could be optimal from a social welfare point of view, and find that the firm repositions more frequently than is efficient when there is full market coverage. With predictable changes in consumer preferences, the optimal repositioning strategy involves overshooting and asymmetric repositioning thresholds. The online appendix is available at https://doi.org/10.1287/mksc.2017.1075 .

Price Competition in Multi-Sided Markets

This paper studies a general model of price competition among platforms offering differentiated services in multi-sided markets. We incorporate a general form of both within-side and cross-side externalities into a discrete choice model of random utility maximization by consumers on each side of the markets. We consider a two-stage game in which the platforms choose prices (or user fees) simultaneously in the first stage, followed by consumers on all sides simultaneously deciding which platform to join (single-homing) in the second stage. We show that in a symmetric setting with full market coverage, there exists a symmetric equilibrium in prices and the equilibrium price on each side follows a simple rule: The price equals the cost, plus a mark-up due to product differentiation, minus a subsidy due to cross-side externalities. The subsidy to each side accounts for the degree of the aggregate marginal externalities of that side imposed on all the other sides. As competition among platforms increases, both the product differentiation effect and the cross-subsidy are shown to decrease. As such, the price on one side can decrease while the price on another side may increase with the number of platforms. We also discuss the incentives for platforms to merge and the extent of excessive free entry of platforms into the markets as compared to the social optimum. We further compare uniform pricing rule with discriminatory pricing across different sides of the markets and find that the average price across sides under the discriminatory pricing is higher than the uniform price when the externalities are small or when the number of platforms is large. The impacts of consumers' outside options on the equilibrium prices are also studied.

Profitability and Growth in Motor Insurance Business: Empirical Evidence from Germany

Over recent years, the German motor insurance business has faced significant changes, including a growing importance of direct insurance offerings. Motor insurance products are offered by a wide range of insurers, with companies differing in terms of legal status, size, product portfolio, distribution strategy and operational efficiency. Furthermore, one distinguishes between two main products, namely motor third-party liability (MTPL) and motor own damage (OD). In our research, we analyse to what extent the characteristics of the companies can explain the premiums, the total claims costs and the operating expenses per contract in MTPL and OD. For our analysis, we use panel data of insurance companies, offering motor insurance products in Germany, for the years 2002–2014. The panel data provide almost full market coverage. In our study, we apply different statistical tests and multilinear regression models. We show that mutuals relate to lower premiums, lower total claims costs and lower operating expenses per contract when compared to listed companies. In addition, direct insurance companies get along with lower premiums and lower operating expenses per contract compared to traditional companies selling via agents or brokers. Furthermore, we find major differences related to the range of the product portfolio, the size of the motor business, the dominance of the motor business within the non-life business, and the calendar year. Our results are relevant to academics and practitioners alike and help to better understand the German motor insurance business.

Strategic Intellectual Property Sharing: Competition on an Open Technology Platform Under Network Effects

In this paper, we explore the strategic decision of an incumbent to open a proprietary technology platform in order to allow same-side co-opetition in a market characterized by network effects. We propose a novel model that, to the best of our knowledge, is the first attempt to analytically conceptualize in this context the interplay among the degree of same-side platform openness, the absorptive capacity of the entrant, and the intensity of network effects. Our analysis uncovers interesting and non-trivial results. First, when quality is exogenous for the entrant, we find that if the intensity of network effects is very strong then the incumbent prefers to close the technology. Moreover, we discuss various interesting open-platform co-opetition outcomes that arise in parallel with a full market coverage. When the entrant chooses the quality level and the incumbent is strategic in its platform opening decision, we find that intense network effects make new players shun the market so IP-sharing is not possible in equilibrium. When the network effects are of intermediate intensity, the incumbent opens the technology to the entrants who possess a sufficiently high absorptive capacity, calibrating the amount of sharing to the entrant's absorptive capacity level to ensure that the duopoly setting is mutually beneficial. In an extension, we also explore the ability of the incumbent to engineer the strength of network effects in the market. When the incumbent finds it optimal to open its core technology, we observe non-trivial alternating-monotonicity patterns for the intensity of network effects with respect to the entrant's absorptive capacity, revealing complex interplay dynamics between the entrant's cost to join the market and the value of the network to the users. Moreover, we show that a model with exogenous network effects could drastically underestimate the range of entrants' absorptive capacity values for which the incumbent should open its platform. This may lead to sub-optimal blocking of certain firms from the market, causing the incumbent to miss out on valuable co-opetition opportunities.

Penerapan Strategic Marketing Pada Bank Syariah Mandiri Kantor Cabang Jemur Handayani Surabaya

Islamic Banking in Indonesia are developing rapidly. it can be seen by the number of offices that increase from year to year. This development of islamic banking can make a competition between the islamic banking. Therefore, to face the tight competition, islamic banking needs the right strategic marketing that compatible with sharia principle. The strategic marketing consists of three components. They are segmenting, targeting, and positioning. This research aims to know how the application of strategic marketing in Bank Syariah Mandiri Branch Office of Jemur Handayani Surabaya.This research is using qulitative approach with case study strategy. The datacollecting method is using direct interview with Bank Syariah Mandiri Branch Office of Jemur Handayani’s office workers. The data analysis method is using descriptive qualitative approach.The result of this research shows that strategic marketing which is applied in Bank Syariah Mandiri Branch Office of Jemur Handayani are compatible with sharia principle. Market segments in Bank Syariah Mandiri Branch Office of Jemur Handayani are from lending and funding. For targeting, Bank Syariah Mandiri Branch Office of Jemur Handayani is using the full market coverage pattern. And the positioning is done by raising the quality of service.

ENDOGENOUS TIMING IN QUALITY CHOICES AND PRICE COMPETITION

The authors modify the price-setting version of the vertically differentiated duopoly model by Aoki (Effect of Credible Quality Investment with Bertrand and Cournot Competition, 2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Their results show that there are multiple equilibria in pure strategies, whereby firms always select sequential play at the quality stage. They also investigate the mixed-strategy equilibrium, revealing that the probability of generating out-of-equilibrium outcomes is higher than its complement to one. In the alternative case with full market coverage, the authors show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide.

Mass Customization and Guardrails: 'You Can't Be All Things to All People'

A mass customization (“customer as designer”) strategy enables a firm to yield a closer match between its products and customer tastes. A mismatch between those tastes and the delivered product implies a cost to the consumer. Rather than assume all products, other than the one purchased, are immaterial to the customer, we consider the brand-level issue of mismatch between customers’ tastes and the firm’s full range of products. To this end, we permit consumers’ utility to depend upon the distance between their ideal point and the limits of the firm’s product varieties, which we refer to as guardrail products. Mass customization can thus reduce product-specific “fit” costs yet exacerbate brand-level fit. In the absence of brand-level costs, the firm extracts maximal revenue from consumers by offering a range of varieties to cover all possible consumer tastes at a uniform price We show that considering a brand level cost implies that the firm should limit the breadth of the mass customization region to be less than full market coverage. More interestingly, we also find that the firm should optimally implement a differential pricing scheme for those product varieties at the outer extremes of its product line, catering to those consumers with more extreme tastes. Given that a continuum of prices will likely not be practical in application, we also consider the more pragmatic approach of a set of fixed (non-customized) products to serve customers at the taste extremes, with a corresponding set of (lower) fixed prices. We prove this heuristic solution performs close to optimal.

Consumer store choice in Asian markets

Consumers in Asian markets often need to make choices between highuncertainty stores and low-uncertainty stores. For example, an iPhone may be purchased from an Apple authorized retailer (a low-uncertainty store) or from an unauthorized seller (a high-uncertainty one). We build a game-theoretical model to capture the crucial roles of store uncertainty and consumer risk aversion in store choice. A model-based explanation is provided for the coexistence of charging a higher retail price and having a higher product demand. Interestingly, our finding shows that store uncertainty and risk aversion have the potential to enhance the overall market profitability under the full market coverage, whereas such profitability will be reduced under the partial coverage.Moreover, we find that consumer learning might not be beneficial to the market as a whole. While consumer learning increases the expected overall market profitability under the partial coverage, such learning actually decreases the expected overall profitability if the market is fully covered. Not only is the precision of signals during learning relevant, but also the number of signals per se plays an indispensable role in the market. In addition, we find that the second-mover advantage possibly enjoyed by a high-uncertainty store is an important force that changes market outcomes.

Sales Efficiency in Life Insurance: The Drivers for Growth in the German Market

German life insurers are facing consolidation tendencies as the major players increase their market share. As a result, insurance companies are being forced to grow to ensure future prosperity. In the past, the industry has shown that growth can be achieved while maintaining profitability. The central question of our research is to detect factors for the generation of new business. In order to determine what drives sales—and thus growth—in the German life insurance industry, we apply different multi-linear regression models. We use panel data from 1998 to 2011 with characteristics of German life insurers and mostly full market coverage. In our modelling, we distinguish between sales success on the business unit level of life insurance and on the level of specific life products. The sales success drivers for pension insurance as well as term life insurance are analysed. By doing so, we determine different significant drivers for sales success, which include the total return granted to policyholders, commissions paid to sales partners, the solvency of the insurer, company (financial) rating and firm size.

How Can Internet Comparison Sites Work Optimally for Consumers?

In today's information society, there is such a large amount of available information about any given good or service that consumers are unable to make an informed choice. Internet comparison sites (ICSs) could provide a solution to this problem by comparing markets for consumers and making a comprehensive recommendation. However, currently, they are not fully effective for consumers. Consumers do not trust ICSs because of concerns about commission biases and lack of full market coverage. To be fully effective, ICSs also ought to cover non-price dimensions such as product quality and after-sales service. Changing the economic model from the current two-sided platform to a one-sided platform could solve these problems. In order for this to occur, changes or clarifications to existing EU consumer laws might need to be made.

Process and Product Innovation in a Vertically Differentiated Industry

We examine a vertically differentiated duopoly where firms invest in process and product innovation and then compete in prices under full market coverage. We show that (i) process and product innovation are complements (substitutes) for the low-quality (high-quality) firm; (ii) the firm which is initially more efficient invests more than the rival in process innovation; (iii) if the initial differential between marginal costs is sufficiently high, the demand for the less efficient firm is nil and the duopoly equilibrium does not exist. Finally, we investigate the feasibility of R&D cooperation for process innovation.

Endogenous Timing in Quality Investments and Price Competition

We modify the price-setting version of the vertically differentiated duopoly model by Aoki (2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Our results show that there are multiple equilibria in pure strategies, in which firms always select sequential play at the quality stage. We also investigate the mixed-strategy equilibrium, revealing that the probability of generating outcomes out of equilibrium is higher than its complement to one. In the alternative of full market coverage, we show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide.

PROCESS AND PRODUCT INNOVATION IN A VERTICALLY DIFFERENTIATED INDUSTRY

We examine a vertically differentiated duopoly where firms invest in process and product innovation and then compete in prices under full market coverage. We show that (i) process innovation fosters (hinders) product innovation for the low-quality (high-quality) firm; (ii) the firm which is initially more efficient invests more than the rival in process innovation; (iii) if the initial differential between marginal costs is sufficiently high, the demand for the less efficient firm is nil and the duopoly equilibrium does not exist.

Competition Through Technical Progress

This paper investigates the relationship between technical progress, competition, and the impact on consumer's surplus and welfare in the telecommunication industry. A Hotelling model in symmetrical duopoly with full market coverage is introduced. Firms invest in order to improve the quality of their offer and thus consumers' willingness to pay. When the potential for technological advancement is great enough, particularly in the case of information technologies and telecommunication industry, firms are encouraged to invest. Social welfare benefit is greatest and most likely to occur where potential for technological advancement is high, even if it provides no profit to firms. Technological advancement stimulates investment, however, it also requires investment capabilities and therefore enough profits. Thus, different rates of technical progress are both a result of and a cause for different investment rates.