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|Title: ||Target Marketing in a Distribution Channel: Implications for a Manufacturer’s Returns Policy|
|Authors: ||Shih-Ping Jeng;Shan-Yu Chou|
|Contributors: ||NTOU:Department of Shipping and Transportation Management|
|Keywords: ||Returns policy;Target marketing|
Returns policy;Target marketing;Retailer;Manufacturer;Consumer segments
|Issue Date: ||2011-10-20T08:33:36Z
|Publisher: ||Journal of Management|
Abstract:A returns policy, which allows customers to return products for a refund, is commonly offered by manufacturers and retailers. In the markets of frequently purchased products, consumers who are dissatisfied with the products purchased from retailers usually return the products to the retailers rather than manufacturers. The end-user returns at the retail level, in turn, may create a pressure for returns from the retailer to the manufacturer.
This paper considers a monopolistic manufacturer who designs a product line which has different functioning probability for each product (i.e. different quality). Each product may or may not be targeted at a different market segment. The manufacturer decides as well its returns policy (for retailers) and wholesale price for each type of product. Given the product line and returns policy offered by the manufacturer, the retailer decides which products to carry, which product to target to each segment, the returns policy (for consumers) and retail price for each product. Then given the retail price and retailer's returns policy, consumers decide whether and which product to buy.
The results show that providing returns policy on the low-end product at the retail level can be used to screen consumers if consumers' valuations for product quality are positively correlated with their costs of returns. The screening effect, in turn, can alleviate the retailer's incentive problems in a distribution channel. Under some circumstances, the benefits of screening effects and less retailer's incentive problem are so high that it is worth for the manufacturer taking returns from the retailer even the returned merchandise is worthless. When it happens, the manufacturer optimally reduces the quality for the low-end product to best take advantage of the screening function of the returns policies. The intuition behind the result is, first, by using the returns policy as a screening tool, the retailer is able to extract extra consumer surplus from the high segment. That is, the cannibalization problem of the product line is alleviated as the retailer allows returns on the low-end product. Second, if the retailer accepts returns on the low-end product, this returns policy in turn reduces the difference in willingness-to-pay between the two segments, and as a result the retailer faces two more similar consumer segments. The retailer therefore has more incentives to target different products to consumers rather than sell the high-end product to the high segment only. Thus the lack of channel coordination in targeting is mitigated.
|Relation: ||23(5), pp.537-556|
|Appears in Collections:||[航運管理學系] 期刊論文|
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