Sihem Taboubi

Retail promotions with negative brand image effects: Is cooperation possible?

Abstract We consider a channel of distribution with a single manufacturer M and a retailer R. M advertises in national media to build up the image for one of his brands. R promotes locally the brand to increase sales revenue, but these efforts are harmful to the brand image. We address the question whether the two firms can agree to participate in a cooperative promotion program where M pays part of the costs incurred by R when promoting the brand. The model is a differential game with an infinite time horizon. Two Nash equilibria serve as benchmarks for assessing the feasibility of the cooperative program: one in which R is myopic and one in which R is far-sighted. Our results show that a cooperative program is implementable if the level of initial brand image is “small”, or if the level of initial brand image is “intermediate” and promotion is not too damaging to the brand image. In the remaining cases a game without promotional support is played and R should behave myopically in such cases.

A time-consistent open-loop Stackelberg equilibrium of shelf-space allocation

We propose a differential game to study retailers allocation strategy of shelf-space shares between the manufacturers of two competing brands. Each manufacturer can influence the allocation decision by her advertising spending to improve her brands goodwill which in turn affects the demand for her product. The game is played a la Stackelberg with the manufacturers as leaders and the retailer as follower. Stackelberg open-loop equilibrium is characterized and shown to be time-consistent.

The Impact of Manufacturers' Wholesale Prices on a Retailer's Shelf‐Space and Pricing Decisions

This article examines shelf-space allocation and pricing decisions in the marketing chan- nel as the results of a static game playedla Stackelberg between two manufacturers of competing brands and one retailer. The competing manufacturers act as leaders that play a simultaneous and noncooperative game. They fix their transfer prices by taking into account the shelf-space allocation and price-markup decisions of their common exclusive dealer. The results indicate that the wholesale prices of brands are strongly linked to their share of the shelf. The main results of our numerical simulations may be summarized as follows: first, the lower the unit cost and/or the greater the price elasticity, the greater the shelf space allocated to that brand. Second, the higher the shelf-space elasticity, the lower are the wholesale prices and the profits of all channel members.

Price coordination in distribution channels: A dynamic perspective

In this study, we investigate two important questions related to dynamic pricing in distribution channels: (i) Are coordinated pricing decisions efficient in a context where prices have carry-over effects on demand? (ii) Should firms practice a skimming or a penetration strategy if they choose to coordinate or to decentralize their activities? To answer these questions, we consider a differential game that takes place in a bilateral monopoly where the past retail prices paid by consumers contribute to the building of a reference price. The latter is used by consumers as a benchmark to evaluate the value of the product, and by firms to decide whether to adopt a skimming or a penetration strategy.

Incentives for Retailer Promotion in a Marketing Channel

This chapter analyzes a differential game model of a two-member marketing channel. A manufacturer invests in national advertising with the purpose of improving (or sustaining) the image of one of her brands, and her retailer makes local promotions for the brand. The game is played a la Stackelberg with the manufacturer as leader. We characterize and compare equilibria for two scenarios. In the first one, the manufacturer designs an incentive strategy to affect the retailer’s promotion strategy with the objective of maximizing the total channel profit. In the second, the manufacturer’s objective is the maximization of her own payoff.

Impact of Retailer’s Myopia on Channel’s Strategies

We investigate the effects of retailer’s myopic behavior on channel members strategies and on sales in a single-manufacturer single-retailer distribution network (bilateral monopoly). The manufacturer controls her marketing effort and the retailer his price and marketing effort. Demand depends on, among other variables, goodwill whose evolution is function of both players’ marketing efforts. It is shown that a myopic retailer prices at a lower price than a nonmyopic one but invests less in marketing effort. The manufacturer confronted to a myopic retailer sets her marketing effort at a higher level. Manufacturer’s performance is hurt by a myopic retailer.

Dual role of price and myopia in a marketing channel

In this paper we study a dynamic two-player channel where the manufacturer controls the wholesale price and the investment in quality and the retailer chooses the retail price. We consider that the retail price affects both the demand and the perceived quality of the brand and that its variations contribute to the building of an internal reference price. One of the model’s distinctive features is that it accounts for the two meanings of price, i.e., its classical objective measure of the cost of acquiring a particular quantity of the product, and its subjective roles as an assessment of the quality of the product and an evaluation of gains or losses (deal vs. sacrifice) resulting from buying a “cheap” or an “expensive” product. This dual computation is done with respect to the internal reference price.

Incentive Strategies for Shelf-Space Allocation in Duopolies

We examine the issue of shelf-space allocation in a marketing channel where two manufacturers compete for a limited shelf-space at a retail store. The retailer controls the shelf-space to be allocated to brands while the manufacturers make advertising decisions to build their brand image and to increase final demand (pull strategy). Manufacturers also offer an incentive designed to induce the retailer to allocate more shelf-space to their brands (push strategy). The incentive takes the form of a shelf dependent display allowance. The problem is formulated as a Stackelberg differential game played over an infinite horizon, with manufacturers as leaders. Stationary feedback equilibria are computed, and numerical simulations are carried out in order to illustrate how channel members should allocate their marketing efforts.

Pricing Strategies of Complementary Products in Distribution Channels: A Dynamic Approach

This paper investigates the dynamic pricing strategies of firms selling complementary products in a marketing channel. The problem is modelled as a non-cooperative differential game that takes place between decisions makers controlling transfer and retail prices. We computed and compared prices and sales rates of channel members under two scenarios: (i) The first involves a single retailer that sells a unique brand produced by a monopolist manufacturer and (ii) in the second, a complementary product is introduced by an additional manufacturer. We found that in both scenarios, transfer and retail prices decrease over time, but prices decrease faster when the complementary product is introduced into the market. Furthermore, the entry of the complementary product onto the market boosts the sales rate of the existing product. Finally, we found that the retailer in the second scenario always has a non-negative retail margin, meaning that practicing a loss-leadership strategy is not optimal.