۱- Introduction

۲- Literature Review

۳- Preliminaries: Demand Functions and Research Setting

۴- Analyses of Uniform Pricing Strategy and Price Differentiation Strategy

۵- Comparison Between Uniform Pricing Strategy and Price Differentiation Strategy

۶- Conclusions

References

Abstract

Price differentiation or discrimination strategy has been regarded as the best choice for firms with online and offline channels, however, recent years often witnessed the practices of the uniform pricing strategy. This paper aims to address the question whether the uniform pricing strategy may be better for the manufacturer, when the uniform pricing strategy has a positive impact on increasing the customer demand and reducing the operations cost. The research shows that the uniform pricing strategy can be better than the price differentiation strategy when the cost saving and demand increasing are large enough or the consumers’ acceptance of online channel lies in a certain interval. Moreover, the manufacturers or brand owners need a tradeoff between the benefit from online channel and the negative impact from the offline channel when they implement the price differentiation strategy. Finally, the authors obtain some managerial insights and implications based on the numerical analyses, which are in line with the phenomena in practice.

Introduction

Price differentiation or discrimination strategy has been widely regarded as the best choice for manufacturers when they distribute products through both online and offline channels. Such practice was proved reasonable and effective by many academic studies (e.g., [1, 2]). Dolan and Moon[1] studied the pricing decision for the multi-channel retailers and found that it is optimal to implement a different pricing mechanism on different channels. Hughes[2] considered the reduction of information asymmetry and the buyers’ searching costs to explain why there were lower prices on average for products sold through the electronic channels compared with the traditional retail stores. Obviously, it seems reasonable for distributors taking advantage of price differentiation strategy to satisfy different types of customers. However, in recent years, some famous manufacturers or brand owners have chosen the uniform pricing strategy, that is, the same selling price is set on both the online and offline channels. For instance, the Japanese apparel manufacturer UNIQLO and the Spanish apparel manufacturer ZARA have launched the uniform pricing strategy to sell their products on their websites and the retail stores. In China, the famous retailing enterprise SUNING also implemented the uniform pricing strategy. Although these manufacturers or brand owners only implement the uniform pricing strategy for some product categories, such attempts have already achieved great success in attracting customers to expand a larger market share. What’s more, the operation capability of the manufacturer can also be improved. For example, the inventory turnover ratio of SUNING has significantly improved since the uniform pricing strategy was implemented in 2013. When the manufacturer and the retailer collaboratively determine to implement the uniform pricing strategy, the customers are allowed to buy online and pick up in store which will save the operations cost and increase the demand. But the uniform pricing strategy requires that the two channels have the same prices, which limits the choice of prices on different channels. Therefore, an interesting research question naturally arises: Whether the uniform pricing strategy or the price differentiation strategy may be better for the manufacturers with dual channels?