| Title | Product configuration and pricing strategies for manufacturers in heterogeneous retail platforms |
| Author | CHEN Jingxian; ZHANG Qi; XIA Yan; LIANG Liang |
| Abstract | With the rapid development of the platform economy, e-commerce platforms have grown rapidly and presented diverse development trends. They provide a wider range of sales channels and scenarios for many manufacturers and brand owners. As consumer needs and preferences evolve, their product and platform choices have become increasingly diverse and personalized. Online retail platforms are committed to attracting more consumers by providing diversified sales services and product quality assurance. However, these services often come at the cost of higher commissions charged to brand owners. For manufacturers, adopting a single-product model to sell the same product through various retail platforms can allow them to reach consumers with different preferences while avoiding the cost increase associated with producing differentiated products. However, for products with a smaller target customer base, a single-product model may be difficult to accurately reach target consumers, increasing the manufacturer′s sales costs. Therefore, some brands adopt differentiated product configuration strategies to sell different products through multiple heterogeneous platforms. Considering real-world factors, this paper mainly discusses the following issues based on existing literature: 1) Should manufacturers choose a single or differentiated product model when selling products through two heterogeneous retail platforms? 2) Given a specific product model, how should manufacturers determine the product configuration strategy, including product quality level and distribution method? 3) For different product configuration strategies, how should manufacturers choose to achieve maximum profit?This study focuses on a supply chain of one manufacturer and two heterogeneous retail platforms. It considers the manufacturer′s choice between a single-product model and a differentiated product model and studies the product configuration and pricing decisions when the manufacturer sells products through these two heterogeneous platforms. The research process is as follows:First, manufacturers have two options when producing products: a single-product model (referred to as S) and a differentiated product model (referred to as D). Under the single-product model, manufacturers produce a universal product with comprehensive and practical features that meet the needs of most consumers. In the differentiated product model, manufacturers produce basic products that meet fundamental functions and cater to the low-end market, as well as premium products with enhanced features and better user experience. In the single-product model, manufacturers sell the universal product through the high-service-level platform H and the low-service-level platform L. In the differentiated product model, manufacturers have two options: Strategy A (in which the manufacturer sells premium products through platform H and basic products through platform L) and Strategy B (in which the manufacturer sells premium products through platform L and basic products through platform H). Therefore, manufacturers have three product configuration strategies: S, DA, and DB.Next, the manufacturer′s product configuration decision-making process involves three stages: 1) selecting the product configuration strategy, 2) determining the quality of the products to be produced, and 3) setting the sales prices of products on platforms H and L based on their respective qualities. We explore the decision-making regarding product quality levels and sales prices under specific product configuration strategies and study the patterns of consumer preferences for product quality and platform service levels in different scenarios of product quality and sales prices. Finally, an analysis of the optimal product configuration decisions for the three strategies is conducted, providing conditions for manufacturers to choose each product configuration strategy.Finally, through comparative analysis of the equilibrium results under different configuration strategies, the following conclusions are drawn: 1) Under the single-product model, the same product has a higher selling price and higher service level on platform H. 2) Under Strategy DA, when the price sensitivity between platforms is high, the quality and sales price of the basic product will be lower than that of the premium product. However, in scenarios with lower price sensitivity between platforms, the quality and price of the two products depend on consumer preferences for the basic product and the platform′s service level. 3) Under Strategy DB, the relative quality of the basic and premium products primarily depends on consumers′ inherent preferences for product quality, while the price relationship between the products mainly depends on the differences in service levels between platforms. 4) Both the single and differentiated product models are advantageous choices for manufacturers. Under the differentiated product model, the choice of the two configuration strategies mainly depends on the service level provided by platform H. The research results of this study provide valuable theoretical insights for manufacturers to sell products through heterogeneous retail platforms, especially in product quality selection and product configuration decisions. Furthermore, they contribute to a better understanding of the vertical differentiation of retail platforms and the differentiation of platform product quality. |
| Keywords | Heterogeneous; Retail platform; Product configuration; Product quality |
| Issue | Vol. 39, No. 4, 2025 |
Title
Product configuration and pricing strategies for manufacturers in heterogeneous retail platforms
Author
CHEN Jingxian; ZHANG Qi; XIA Yan; LIANG Liang
Abstract
With the rapid development of the platform economy, e-commerce platforms have grown rapidly and presented diverse development trends. They provide a wider range of sales channels and scenarios for many manufacturers and brand owners. As consumer needs and preferences evolve, their product and platform choices have become increasingly diverse and personalized. Online retail platforms are committed to attracting more consumers by providing diversified sales services and product quality assurance. However, these services often come at the cost of higher commissions charged to brand owners. For manufacturers, adopting a single-product model to sell the same product through various retail platforms can allow them to reach consumers with different preferences while avoiding the cost increase associated with producing differentiated products. However, for products with a smaller target customer base, a single-product model may be difficult to accurately reach target consumers, increasing the manufacturer′s sales costs. Therefore, some brands adopt differentiated product configuration strategies to sell different products through multiple heterogeneous platforms. Considering real-world factors, this paper mainly discusses the following issues based on existing literature: 1) Should manufacturers choose a single or differentiated product model when selling products through two heterogeneous retail platforms? 2) Given a specific product model, how should manufacturers determine the product configuration strategy, including product quality level and distribution method? 3) For different product configuration strategies, how should manufacturers choose to achieve maximum profit?This study focuses on a supply chain of one manufacturer and two heterogeneous retail platforms. It considers the manufacturer′s choice between a single-product model and a differentiated product model and studies the product configuration and pricing decisions when the manufacturer sells products through these two heterogeneous platforms. The research process is as follows:First, manufacturers have two options when producing products: a single-product model (referred to as S) and a differentiated product model (referred to as D). Under the single-product model, manufacturers produce a universal product with comprehensive and practical features that meet the needs of most consumers. In the differentiated product model, manufacturers produce basic products that meet fundamental functions and cater to the low-end market, as well as premium products with enhanced features and better user experience. In the single-product model, manufacturers sell the universal product through the high-service-level platform H and the low-service-level platform L. In the differentiated product model, manufacturers have two options: Strategy A (in which the manufacturer sells premium products through platform H and basic products through platform L) and Strategy B (in which the manufacturer sells premium products through platform L and basic products through platform H). Therefore, manufacturers have three product configuration strategies: S, DA, and DB.Next, the manufacturer′s product configuration decision-making process involves three stages: 1) selecting the product configuration strategy, 2) determining the quality of the products to be produced, and 3) setting the sales prices of products on platforms H and L based on their respective qualities. We explore the decision-making regarding product quality levels and sales prices under specific product configuration strategies and study the patterns of consumer preferences for product quality and platform service levels in different scenarios of product quality and sales prices. Finally, an analysis of the optimal product configuration decisions for the three strategies is conducted, providing conditions for manufacturers to choose each product configuration strategy.Finally, through comparative analysis of the equilibrium results under different configuration strategies, the following conclusions are drawn: 1) Under the single-product model, the same product has a higher selling price and higher service level on platform H. 2) Under Strategy DA, when the price sensitivity between platforms is high, the quality and sales price of the basic product will be lower than that of the premium product. However, in scenarios with lower price sensitivity between platforms, the quality and price of the two products depend on consumer preferences for the basic product and the platform′s service level. 3) Under Strategy DB, the relative quality of the basic and premium products primarily depends on consumers′ inherent preferences for product quality, while the price relationship between the products mainly depends on the differences in service levels between platforms. 4) Both the single and differentiated product models are advantageous choices for manufacturers. Under the differentiated product model, the choice of the two configuration strategies mainly depends on the service level provided by platform H. The research results of this study provide valuable theoretical insights for manufacturers to sell products through heterogeneous retail platforms, especially in product quality selection and product configuration decisions. Furthermore, they contribute to a better understanding of the vertical differentiation of retail platforms and the differentiation of platform product quality.
Keywords
Heterogeneous; Retail platform; Product configuration; Product quality
Issue
Vol. 39, No. 4, 2025
References