Channel selection in e-commerce age: A strategic analysis of co-op advertising models

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1 Jounal of Industial Engineeing and Management JIEM, 013 6(1): Online ISSN: Pint ISSN: Channel selection in e-commece age: A stategic analysis of co-op advetising models Yongmei Liu, Yuhua Sun, Junhua Hu Business School of Cental South Univesity (China) Received Novembe 01 Accepted Januay 013 Abstact: Pupose: The pupose of this pape is to develop and compae two co-op advetising models: advetising model unde taditional channel and co-op advetising model unde dual channel, to select optimal channel stuctue to sell poducts fo manufactue and to deive optimal co-op advetising stategies fo the manufactue and the etaile. Design/methodology/appoach: Stackelbeg game theoetical is used to develop two co-op advetising models: co-op advetising model unde taditional channel and co-op advetising model unde dual channel. Then we compae the two models to select optimal channel stuctue to sell poducts fo manufactue and to deive optimal co-op advetising stategies fo the manufactue and the etaile. Futhemoe, we analyze the impact of poduct web-fit on these optimal stategies and illustate by some numeal examples. Based on ou esults, we povide some significant theoies and manageial insights, and deive some pobable paths of futue eseach. Findings: We povide a famewok fo eseaching optimal co-op advetising stategies in a two-level supply chain consideing diffeent maketing channel stuctues. Fist, we discuss the taditional channel co-op adveting model and the dual channel co-op advetising model based on Stackelbeg game theoetical, and we deive optimal co-op advetising stategies. Next, compaisons of these two channel stuctues ae discussed and we find that the manufactue always benefits fom dual channel. But the etaile not always benefits fom dual channel

2 Jounal of Industial Engineeing and Management stuctue, and dual channel stuctue is bette than etail channel with cetain conditions. Also, the optimal co-op advetising stategies fo the manufactue and the etaile ae obtained. Reseach limitations/implications: Fist, we focus on the afoementioned two channel stuctues; a futhe compaison with othe channel stuctues can be investigated. Second, we ignoe some factos that influence the demand of poduct, such as sevice and pice. We can do some eseaches fom the point of these factos. Thid, how demand uncetainty affects the channel selection and co-op advetising stategy is anothe inteesting eseach item. Pactical implications: The manufactue and the etaile know that the impact of co-op adveting on the demands of taditional channel and diect channel, both would like to choose easonable stategies to impove the channel coodination. Theefoe, it would be best if business manages conduct maket suvey befoe they stat thei co-op advetising campaign. Oiginality/value: Two new co-op advetising models in E-commece age ae developed, and the impact of poduct web-fit on these optimal stategies ae analyzed and illustate by some numeal examples. In addition, optimal channel stuctue in E-commece age ae selected fo manufactue and the etaile. Keywods: taditional channel, dual channel, channel selection, co-op advetising stategy, Stackelbeg game 1. Intoduction The suge in the Intenet and thid pat logistics ove the past decades has significantly changed supply chain management and given business an unpecedented maketing oppotunity. Fim can effectively handle ode using the Intenet and conveniently send poducts to customes using thid pat logistics. Moe and moe manufactues stat to adopt diect channel to sell poducts and the intoduction of diect channel has pofound and lasting influence on channel selection of poducts (Dumongsii, Fan & Jain, 008). Compaing with any single channel, dual channel can bette ealize the maket penetation. Howeve, the existing of diect channel makes manufactues to be the competito of etailes and lead to channel conflict (Tsay & Agawal, 004). Whethe intoducing diect channel into taditional channel o not is woth discussing. On the othe hand, because co-op advetising inceases the channel demand, it can patly alleviate channel conflict. Theefoe, channel selection of poducts and co-op advetising stategies in e-commece age ae vey impotant and inteesting

3 Jounal of Industial Engineeing and Management Maketing channel is each link of the pocessing that poducts tansfe fom manufactues to end customes o uses. It not only makes fims meet customes needs, but also makes fims to gain competitive edge (Kotle, 000). Howeve, pevious analysis indicates that channel conflict emeges because manufactues add diect channel to sell poducts. The liteatues on multi-channel supply chain involving a diect channel and a taditional etail have been devoted to detemining whethe the manufactue should add diect channel to its existing taditional channel. Rhee and Pak (000) develop a model in which a manufactue has an online diect stoe, has an independent taditional etaile, o has both channel, and they eveal that dual channel is bette than the othe two channel stuctue when customes valuations of the etail sevice ae simila acoss segments. Chiang, Chhajed and Hess (003) show that it is favoable fo the manufactue to set up a diect channel to compete with the etaile, they also ecommend a Paeto zone whee both the manufactue and the etaile can be beneficial afte the manufactue add the diect channel. Chiang and Monahan (005) compae taditional channel stuctue, diect channel stuctue and dual channel stuctue, and they popose that dual channel stuctue stategy outpefoms the othe two single channel stuctue stategies in most cases. Aya, Mittendof and Sappington (007) have the same conclusion maks. Tsay and Agawal (004) also addess taditional channel and diect channel to show that both the manufactue and etaile can benefit fom dual channel stategy if the manufactue is willing to educe the wholesale pice. To sum up, diect channel beaks the balance between the manufactue and his downsteam etailes, and easonable channel choice can alleviate channel conflict. Howeve, in afoementioned studies, little discussion has been given to co-op advetising, even though co-op advetising can patly alleviate channel conflict. Co-op advetising is an inteactive elationship between the manufactue and the etaile in a supply chain (Li, Huang, Zhu & Chau, 00). In geneal, the manufactue adopts co-op advetising to motivate the etaile sales and influence potential consumes puchasing behavio to incease total demand. Many industies adopt co-op advetising which play a significant pomotional ole fo many manufactues and etailes (Huang & Li, 001; Huang, Li & Mahajan, 00; Li et al., 00). Compaed with 1987, co-op advetising expenditue of U.S. companies is inceasing by about 40 billion. This incease indicates that the impotance to eseach co-op advetising. In the maketing and management liteatues, co-op advetising models in supply chain including manufactue and etailes have focused on game theoetical to exploe the ole of co-op advetising in channel coodination. Fo example, Dant and Bege (1996), Begen and John (1997), Kim and Staelin (1999), Huang et al. (001), Huang et al. (00), Li et al. (00), and Kay and Zaccou (006). Howeve, these liteatues focus on co-op advetising stategy in single channel stuctue, little on co-op advetising in multichannel even though moe and moe manufactues add diect channel to its existing taditional channel. Yan, Ghose and Bhatnaga (006) discuss Stackelbeg game and Betand

4 Jounal of Industial Engineeing and Management game fo a pice and opeative advetising model in dual channel supply chain. This pape does not make co-op advetising expenditue as decision vaiable and co-op advetising does not incease the demand of poducts, only changes distibuted popotion of the demand between taditional channel and diect channel. In fact, co-op advetising can offe customes the infomation of poducts and thus co-op advetising inceases the demand of poducts. In geneal, thee has been a scacity of models that deal with channel selection and co-op advetising stategies in multi-channel supply chain. This pape consides a supply chain including one manufactue and one etaile, but it diffes fom pevious woks in seveal ways. Fist, this study consides the co-op advetising expenditue undetaken by the manufactue and the etaile, and co-op advetising can incease the demand of diect channel and taditional channel. Specially, the impact of co-op advetising on the demand of diect channel is diffeent fom the impact of co-op advetising on the demand of taditional channel. In a two-level supply chain setting, the etaile s advetising campaign encouages potential customes to puchase the poducts, and the manufactue can gain fom the advetising campaign. The manufactue undetakes the patly expenditue of etaile s advetising, namely co-op advetising. In addition, because the chaacteistics the two channels ae diffeent, the impacts of co-op advetising on the two channels ae diffeent too. Second, this study makes etaile s co-op advetising expenditue and manufactue s faction of co-op advetising expenditue as decision vaiables, and we deive optimal maket stategies in e- commece age. In ou study, we use Stackelbeg game theoetical to develop two co-op advetising models: co-op advetising model unde taditional channel and co-op advetising model unde dual channel. We addess channel selection and co-op advetising stategies fo the manufactue, and co-op advetising stategy fo the etaile. Futhemoe, we also focus on the impact of poduct web-fit on these optimal stategies and identify pobable paths of futue eseach. The emainde of this study is oganized as follows: Section outlines the model famewok and the necessay assumptions and notations. Section 3 poposes taditional channel co-op advetising model and dual channel co-op advetising model, and then analyze the two models. Finally, the two co-op advetising models ae compaed and optimal maketing stategies. A numeical study is povided in Section 4. Conclusions ae dawn in Section 5.. Model famewok We conside a two-level supply chain including one manufactue and one etaile. We study and compae two diffeent supply chain scenaios as illustated in Fig. 1. Scenaio R epesents a taditional channel supply chain stuctue in which the manufactue sells poducts though the etaile. Scenaio RD is dual channel: diect channel, namely the manufactue sells - 9 -

5 Jounal of Industial Engineeing and Management poducts to end customes diectly; taditional channel, namely the manufactue sells poducts to the etaile and the etaile sells poduct to end customes. Figue 1. The supply chain stuctue of Scenaios R, RD We assume that thee is only one kind of poduct fo sale. We use D d to epesent the demand of diect channel and D to epesent the demand of taditional channel. The demand of each channel is assumed to be affected mainly by co-op advetising. As in Huang, Yang and Zhang (011), we assume that the demands of diect channel and taditional channel ae influenced by co-op advetising in diffeent ways. Thus in Scenaio R, we have D a k A R R (1) D d R 0 () In Scenaio RD, we have D RD ( 1) a k A RD (3) D d RD a k d A RD (4) whee a epesents base demand; k and k d epesent the impact factos of co-op advetising on the demand of etail channel and diect channel, espectively, and the impact of co-op advetising on the demand of diect channel is diffeent fom the impact of co-op advetising on the demand of taditional channel; epesents the poduct web-fit, which is the compatibility of the poduct with web diect channel accoding to the chaacteistics of the poduct and the natue of web diect channel, 0<<1, whee 0 epesents that the poducts have no compatibility with web diect channel and 1 epesents that the poducts complete compatibility with web diect channel; A epesents the etaile s co-op advetising expenditue. The manufactue s maginal pofit fo each unit to be sold in taditional channel is m1, and the manufactue s maginal pofit fo each unit to be sold in diect channel is m, 0< m1 < m,

6 Jounal of Industial Engineeing and Management namely the pice of diect channel is lage than the wholesale pice; the etaile s maginal pofit fo each unit to be sold is. The faction of co-op advetising expenditue which the manufactue will to shae with the etaile is t, which is the manufactue s co-op advetising stategy. In Scenaio R, the manufactue s, the etaile s and the supply chain s pofit functions ae as the following: mr m 1D R mdd R trar (5) R D R ( 1tR) AR (6) tr mr R m 1 D R mdd R D R AR (7) In Scenaio RD, the manufactue s, etaile s and supply chain s pofit functions ae as the following: mrd m 1D RD mdd RD trd ARD (8) RD D RD ( 1tRD ) ARD (9) trd mrd RD m 1 D RD mdd RD D RD ARD (10) We use a Stackelbeg leade-followe game to descibe the elationship between the manufactue and the etaile. The manufactue as the leade decides the faction of co-op advetising expenditue, and then the etaile as the followe decides co-op advetising expenditue. This pape fist analysis taditional channel situation (Scenaio R), and dual channel situation (Scenaio RD). Then compae the two scenaios to select optimal channel to sell poducts fo the manufactue and make optimal co-op advetising stategies fo the manufactue and the etaile. 3. The model In this pape, co-op advetising models fo the two-level supply chain ae deived fom taditional channel (Scenaio R) and dual channel (Scenaio RD). In Scenaio R, each membe in the supply chain focuses on maximizing thei own pofit, without channel conflict. On the othe hand, in Scenaio RD, the upsteam manufactue and downsteam etaile have co-op elationship, but they compete with each othe, too. The issue that which channel stuctue is bette fo the manufactue and the etaile is woth eseaching. We will fist demonstate the models of taditional channel and dual channel. Then we compae the two scenaios to select optimal maket stategies

7 Jounal of Industial Engineeing and Management Taditional channel supply chain decision When the manufactue only sets up taditional channel, the etaile does not compete with the diect channel owned by the manufactue and thee is no channel conflict. The manufactue and the etaile make decisions to maximize thei pofits. In this pape, ou Stackelbeg model leade is the manufactue, who acts as the fist move by choosing the faction of co-op advetising expenditue. The etaile, acting as the followe, then chooses optimal co-op advetising stategy based on the manufactue s decision. Fist, we analyze the etaile s optimal co-op advetising stategy, in the second stage of the game. The etaile s pofit maximization poblem can be expessed as: max R( A R) ( a k AR ) (1 tr) AR (11) It is easy to pove that -R (A R ) is a concave function of A R, the optimal value of the co-op advetising expenditue is detemined by setting the fist deivative of -R (A R ) with A R to be zeo as follows: A R k [ (1 t R ] ) (1) The optimal pofit of the etaile as follows: R k a 4(1 t R ) (13) Popety 1: Unde the taditional channel supply chain setting, (a) the etaile s optimal co-op advetising expenditue A R inceases with the impact of co-op advetising on the demand of taditional channel k R, the faction of co-op advetising expenditue which manufactue will to shae with etaile t R ; (b) the etaile s optimal pofit -R inceases with the impact of co-op advetising on the demand of taditional channel k, the faction of co-op advetising expenditue which manufactue will to shae with etaile t R. Popety 1(a) indicates that when co-op advetising moe efficiently pomotes the poducts in taditional channel and the manufactue undetakes moe faction of the etaile s co-op advetising expenditue, and the etaile would like to invest moe into co-op advetising campaign. It is intuitive that the etaile s co-op advetising efficiency of taditional channel incease, the demand of taditional channel is high, and the etaile s pofit is high. The etaile would like to invest moe into co-op advetising campaign. On the othe hand, the moe the

8 Jounal of Industial Engineeing and Management manufactue would like to shae, the less the etaile s co-op advetising expenditue. Namely, the etaile can benefit moe fom co-op advetising campaign and would like to invest moe. These esults in Popety 1(b) eveal that when co-op advetising moe efficiently pomotes the poduct in taditional channel and the manufactue undetakes moe of the etaile s co-op advetising expenditue, the etaile s pofit will to be moe. It is also easonable to expect that when the etaile s co-op advetising efficiency of the taditional channel and the manufactue s co-op advetising appotionment faction ae moe, the demand of taditional channel is highe and the etaile s co-op advetising expenditue is less. Theefoe, the etaile s pofit will to be moe. Second, we analyze the manufactue s optimal co-op advetising stategy, in the fist stage of the game. The manufactue will choose optimal faction of co-op advetising expenditue accoding to the etaile s optimal co-op advetising stategy. Substituting (1) into () and (1) into (5), we deive the manufactue s pofit function: m R( tr) m 1( a k AR ) trar (14) It is easy to pove that m-r (t R ) is a concave function of t R, the optimal value of the faction of co-op advetising expenditue is detemined by setting the fist deivative of m-r (t R ) with t R, to be zeo as follows: t R m1 m1 (15) The optimal pofits of the etaile and the manufactue as follows: R 1 a k 8 ( m1 ) (16) mr a 1 16 k ( m1 ) (17) Popety : Unde the taditional channel supply chain setting, (a) the manufactue s optimal faction of co-op advetising expenditue t R inceases with the manufactue s maginal pofit fo each unit to be sold in etail channel m1, but deceases with the etaile s maginal pofit fo each unit to be sold ; (b) the manufactue s optimal pofit m-r inceases with the impact of co-op advetising on the demand of etail channel k

9 Jounal of Industial Engineeing and Management Popety (a) means that when the manufactue s maginal pofit fo each unit to be sole in etail channel is high and the etaile s maginal pofit fo each unit to be sold is less, the manufactue would like to shae moe of the etaile s co-op advetising expenditue. It is intuitive that if the manufactue s maginal pofit fo each unit to be sold in etail channel is moe, he would like to shae moe of co-op adveting. Howeve, if the etaile s maginal pofit fo each unit to be sold in etail channel is less, he would like to shae moe of co-op adveting to encouage the etaile. Popety (b) shows that when the impact of co-op advetising on the demand of taditional channel, the manufactue s pofit will to be moe. It is also intuitive that when the etaile s co-op advetising efficiency of the taditional channel ae moe, the demand of taditional channel is highe. Theefoe, the manufactue s pofit will to be moe. 3.. Dual channel supply chain decision When the manufactue adds diect channel to its existing taditional channel, the etaile competes with the diect channel owned by the manufactue. The elationship between the manufactue and the etaile is not only co-op, but also competitive. And the change of the manufactue s ole esults in channel conflict. On the othe hand, co-op advetising not only inceases the demand of taditional channel, but also inceases the demand of diect channel in dual channel supply chain. In addition, the influence of co-op advetising on diect channel demand is diffeent fom the impact of co-op advetising on the demand of taditional channel. Theefoe, how the manufactue and the etaile make thei decisions is woth eseaching in this channel stuctue. The Stackelbeg game is used in dual channel supply chain, too. Thus, the etaile s pofit maximization poblem in Scenaio RD can be expessed as follows: max RD ( A RD ) [(1 ) a k ARD ] (1 trd ) ARD (18) Using a simila method developed in taditional channel, optimal solutions of the etaile s coop advetising can be obtained by solving the fist ode equation of (19), as follows: A RD k [ (1 t RD ] ) (19) The optimal pofit of the etaile as follows: k RD (1 ) a (0) 4(1 trd ) We have seen in Popety 1 that unde taditional channel setting, the etaile s co-op advetising expenditue always inceases with the impact of co-op advetising on the demand of etail channel k, and the manufactue s faction of co-op advetising expenditue t RD. We also see that the etaile s pofit always inceases with the impact of co-op adveting on the

10 Jounal of Industial Engineeing and Management demand of taditional channel k, and the manufactue s faction of co-op advetising expenditue t RD. It tuns out that these esults hold fo dual channel as well. In addition, the etaile s pofit deceases with the poduct web-fit. It is easonable to expect that when the poduct is moe compatible with web diect channel, the demand of diect channel inceases and the base demand of taditional channel deceases. Theefoe, the etaile s pofit deceases with the poduct web-fit. Then, we analyze the manufactue s optimal co-op advetising stategy, in the fist stage of the game. Substituting (3) into (4) and (19) into (8), we deive the manufactue s pofit function: m RD ( trd ) m 1[(1 ) a k ARD ) trd ARD (1) Using a simila method developed in taditional channel, the optimal value of manufactue s faction of co-op advetising expenditue is detemined by setting the fist deivative of m-rd (t RD ) with t RD, to be zeo as follows: t RD m 1k k m1 mk k m d d k k () The optimal pofits of the etaile and the manufactue as follows: 1 ( 1) a k (m 1k mk 8 RD d k ) (3) 1 16 m RD m 1( 1) a ma (m 1k mkd k ) (4) Popety 3: Unde the dual channel supply chain setting, (a) the manufactue s optimal faction of co-op advetising expenditue t RD inceases with the manufactue s maginal pofit fo each unit to be sold in etail channel m1, the manufactue s maginal pofit fo each unit to be sold in diect channel m, and the impact of co-op advetising on the demand of diect channel k d ; but deceases with the etaile s maginal pofit fo each unit to be sold and the impact of co-op advetising on the demand of etail channel k ; (b) the manufactue s optimal pofit m-rd inceases with the impact of co-op advetising on the demand of etail channel k, the impact of co-op advetising on the demand of dual channel k d and the poduct web-fit

11 Jounal of Industial Engineeing and Management We have seen the esults in Popety that unde the taditional channel setting ae same with Popety 3. In addition, Popety 3(a) means that when the manufactue s maginal pofit fo each unit to be sole in diect channel is high, the manufactue would like to shae moe of the etaile s co-op advetising expenditue. It is intuitive that if the manufactue s maginal pofit fo each unit to be sold in diect channel is moe, he would like to shae moe of co-op adveting. Popety 3(a) also eveals that the manufactue would like to shae moe of the etaile s co-op advetising expenditue if the impact of co-op advetising on the demand of diect channel is lage and the impact of co-op advetising on the demand of taditional channel is smalle. If the manufactue knows the impact of co-op advetising on the demand of diect channel and the demand of etail channel, he would like to shae easonable with the etaile to impove the channel coodination. Popety 3(b) also shows that when co-op advetising moe efficiently pomotes the poduct in diect channel, and the poduct is moe compatible with web diect channel, the manufactue s pofit will to be moe. It is also intuitive that when the etaile s co-op advetising efficiency of diect channel is moe, the demand of diect channel is highe, and the manufactue s pofit will to be moe Model compaison In this section, we discuss whethe the manufactue and the etaile would be bette off in RD than in R and deive the diffeences between the optimal stategies in the two scenaios and develop some manageial guidelines. Compaing the coesponding stategies in Scenaios R and RD, we obtain the following esults. Theoem 1 (a) Fo the manufactue, Scenaio RD outpefoms Scenaio R, m-rd > m-r ; fo the etaile, Scenaio RD outpefoms R, -RD > -R, if m k k d (5) 4a (b) The manufactue s faction of co-op advetising expenditue in Scenaio RD is highe than the etaile s co-op adveting expenditue in Scenaio R, t RD >t R ; (c) The etaile s co-op advetising expenditue in Scenaio RD is highe than the etaile s coop adveting expenditue in Scenaio R, A RD >A R. Theoem 1(a) eveals that the manufactue always benefits fom adding a diect channel. It is intuitive because the existence of diect channel esults in demand tansfe fom taditional channel to diect channel, and geneates moe pofits fo the manufactue by owning the diect channel. Theefoe, the manufactue always chooses dual channel to sell poduct. Theoem 1(a) also shows that the etaile can pefom bette in Scenaio RD than in Scenaio

12 Jounal of Industial Engineeing and Management R when the value of the poduct web-fit is smalle than some theshold. It is also easonable that when the poduct is less compatible with web diect channel, the demand tansfe fom taditional channel to diect channel is small, the etaile can benefit moe fom Scenaio RD than Scenaio R. Theoem 1(b) indicates that the manufactue shae moe with the etaile if he adds a diect channel. As showed in Theoem 1(a), the manufactue s pofit in Scenaio RD is lage than in Scenaio R, but if and only if the poduct web-fit m k k d 4a, the etaile s pofit in Scenaio RD is lage in Scenaio R. In ode to emit channel conflict, the manufactue will always shae moe faction of co-op advetising expenditue with the etaile. Thus, the etaile inceases co-op advetising expenditue to attact moe potential customes to puchase the poducts, and then the co-op advetising campaign can incease the etaile s own pofit, as showed in Theoem 1(c). 4. Numeical examples The decision policies poposed in this study can be applied in solving the co-op advetising fo the supply chain involving one etaile and one manufactue. While ou findings can be deived analytically, the analytical expessions ae too complex to povide meaningful insights. Thus in this section, some numeical examples ae given to illustate the effect of changes in poduct web-fit on the manufactue s pofit, the etaile s pofit and the pofit of supply chain system. Fo ou numeical examples, the basic settings with espect to the paametes ae summaized in Table 1. Base values The base demand of poduct(a) 00 The manufactue s maginal pofit fo each unit to be sold in etail channel ( m1) The manufactue s maginal pofit fo each unit to be sold in diect channel ( m) 8 The etaile s maginal pofit fo each unit to be sold ( ) 5 The impact of co-op advetising on the demand of taditional channel(k ) 1. The impact of co-op advetising on the demand of diect channel(k d) 1.8 Table 1. Paametes setting in ou numeical examples Figue eveals that pofit of the supply chain in Scenaio RD is positively elated to the poduct web-fit, but pofit of the supply chain in Scenaio R is not elated to the poduct webfit. Because taditional channel does not have web diect channel, the demand of taditional channel is not elated to the poduct web-fit. Also, we obseved that pofit of the supply chain in Scenaio RD is highe than pofit of the supply chain in Scenaio R settings. Theefoe, fo the supply chain, it is bette to adopt dual channel. Howeve, the manufactue and the etaile ae independent, and the poblem which channel stuctue is bette fo them is shown in Figue

13 Jounal of Industial Engineeing and Management Figue 3 indicates that the effect of changes in poduct web-fit on the manufactue s pofit, the etaile s pofit unde diffeent scenaios. Similaly, the manufactue s pofit and the etaile s pofit in Scenaio R ae not elated to the poduct web-fit. We also find that the manufactue s pofit in Scenaio RD inceases with the poduct web-fit, and the etaile s pofit in Scenaio RD deceases with the poduct web-fit. This esult confims ou analytical obsevations fom Poposition 3(b). Note wothily, when the poduct web-fit is less than 0.5, the etaile s pofit in Scenaio RD is lage than the manufactue s pofit; but when the poduct web-fit is lage than 0.5, the etaile s pofit in Scenaio RD is less than the manufactue s pofit. Figue. Pofit of the supply chain unde diffeent scenaios Figue 3. Supply chain playes pofits unde diffeent scenaios 5. Concluding emaks In this pape, we povide a famewok fo eseaching optimal co-op advetising stategies in a two-level supply chain consideing diffeent maketing channel stuctues. Fist, we discuss the taditional channel co-op adveting model and the dual channel co-op advetising model based on Stackelbeg game theoetical, and we deive optimal co-op advetising stategies. Next, compaisons of these two channel stuctues ae discussed and we find that the manufactue always benefits fom dual channel. But the etaile not always benefits fom dual channel stuctue, and dual channel stuctue is bette than etail channel with cetain conditions. Also, the optimal co-op advetising stategies fo the manufactue and the etaile ae obtained. Accoding to these esults, we exploe some impotant theoies and manageial insights. Futhemoe, ou numeical examples illustate the impact of poduct web-fit on these optimal maket stategies. Moe specifically, ou study pesents some manageial implications fo business manages. If the manufactue and the etaile know that the impact of co-op adveting on the demands of taditional channel and diect channel, both would like to choose easonable stategies to impove the channel coodination. Theefoe, it would be best if business manages conduct maket suvey befoe they stat thei co-op advetising campaign

14 Jounal of Industial Engineeing and Management This pape has its limitations. Fist, we focus on the afoementioned two channel stuctues; a futhe compaison with othe channel stuctues can be investigated. Second, we ignoe some factos that influence the demand of poduct, such as sevice and pice. We can do some eseaches fom the point of these factos. Thid, how demand uncetainty affects the channel selection and co-op advetising stategy is anothe inteesting eseach item. Suppot Foundation item(s): Poject suppoted by the National Natual Science Foundation, China (No , ); the Two-oiented Society Reseach Cente of Cental South Univesity 985 Poject unde Gant (No.ZNLX110); Pogam fo New Centuy Excellent Talents in Univesity by Ministy of Education, China (No. NCET ). Refeences Aya, A., Mittendof, B., & Sappington, D.E. (007). The Bight Side of Supplie Encoachment. Maketing Science, 6(5), Begen, M., & John, G. (1997). Undestanding coopeative advetising paticipation ates in conventional channels. Jounal of Maketing Reseach, 35(3), Chiang, W.K., & Monahan, G. (005). Managing inventoies in a two-echelon dual-channel supply chain. Euopean Jounal of Opeational Reseach, 16(), Chiang, W.K., Chhajed, D., & Hess, J.D. (003). Diect maketing, indiect pofits: a stategic analysis of dual-channel supply chain design. Management Science, 49(1), Dant, R.P., & Bege, P.D. (1996). Modeling coopeative advetising decisions in fanchising. The Jounal of the Opeation Reseach Society, 47(9), Dumongsii, A., Fan, M., & Jain, A. (008). A supply chain model with diect and etail channels. Euopean Jounal of Opeational Reseach, 187(3), Huang, S., Yang, C., & Zhang, X. (011). Picing and coopeative advetising decision models in dual-channel supply chain. Compute Integated Manufactuing Systems, 17(1),

15 Jounal of Industial Engineeing and Management Huang, Z., & Li, S.X. (001). Coopeative advetising models in a manufactue-etaile supply chain: A game theoy appoach. Euopean Jounal of Opeational Reseach, 135(3), Huang, Z.M., Li, S.X., & Mahajan, V. (00). An analysis of manufactue-etaile supply chain coodination in coopeative advetising. Decision Sciences, 33(3), Kay, S., & Zaccou, G. (006). Could coopeative advetising be a manufactue s countestategy to stoe bands. Jounal of Business Reseach, 59(9), Kim, S.Y., & Staelin, R. (1999). Manufactue allowances and etaile pass-though ates in a competitive envionment. Management Science, 18(1), Kotle, P. (000). Maketing Management, (10th Ed.). Beijing, China: Tsinghua Univesity Pess. Li, S.X., Huang, Z., Zhu, Z., & Chau, P.Y.K. (00). Coopeative advetising, game theoy and manufactue-etaile supply chains [J].Omega, 30(5), Rhee, B., & Pak, S.Y. (000). Online stoes as a new diect channel and emeging hybid channel system. Woking pape. Tsay, A.A., & Agawal, M. (004). Channel conflict and coodination in the e-commece age. Poduction and Opeations Management, 13(1), Yan, R., Ghose, S., & Bhatnaga, A. (006). Coopeative advetising in a dual channel supply chain. Intenational Jounal of Electonic Maketing and Retailing, 1(), Jounal of Industial Engineeing and Management, 013 ( El atículo está con Reconocimiento-NoComecial 3.0 de Ceative Commons. Puede copialo, distibuilo y comunicalo públicamente siempe que cite a su auto y a Intangible Capital. No lo utilice paa fines comeciales. La licencia completa se puede consulta en

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