Research On Operations Strategy Of A Two-Product Supply Chain With Gift Card Promotions

Promotion is a mature marketing tool,and many merchants often use various promotion methods to expand product sales and increase profits.With the rapid development of e-commerce,physical retailers are weak in marketing.Some commonly used promotional tools are not enough to attract consumers and thus fail to achieve the intended marketing purpose.On the other hand,in the supply chain environment,manufacturers also directly implement price promotions to increase brand loyalty and expand product demand.The emergence of gift card promotion has quickly gained the favor of many retailers and manufacturers who launched a variety of gift card promotions to attract consumers to participate.At the same time,the choice and design of the optimal model for gift card promotion have become an important issue in the academic community.At this stage,qualitative analysis is sufficient to discuss the impacts of gift card promotions on merchants and consumers.However,the research on the design and optimization of gift card promotions by using quantitative analysis is still scarce,especially from a supply chain perspective.The research on how to formulate a multiproduct gift card promotion strategy is in its infancy.Given this,based on the background of the two-product supply chain,this dissertation uses a quantitative model to construct different supply chain power structures.Under different supply chain structures,this dissertation studies the manufacturer-sponsored gift cards and retailer-sponsored gift cards for the price decision,gift cards decision and corresponding profit impact mechanism respectively.Furthermore,a corresponding cost sharing mechanism is designed for the retailer and manufacturers in the supply chain within gift cards promotion,which ensures the maximum profit of the supply chain by taking reasonableness and fairness into consideration.First,this dissertation studies the design and optimization of the optimal gift card promotion strategy in a manufacturer power two-product supply chain.We construct a supply chain game model consisting of two manufacturers and one retailer.In such a supply chain,the two upstream manufacturers act as supply chain leaders and determine their respective wholesale prices.The retailer,as a follower of the supply chain,sells the two products to consumers and determines the retail prices.The retailer or the manufacturer decides whether to carry out a gift card promotion to consumers by deciding the optimal gift card face value.Based on the game model,we use the inverse induction method to solve and compare the equilibrium results under three pricing strategies.Furthermore,we discuss the optimal gift card strategies and related influencing factors based on consumers’ time-inconsistent behavior and a pair of complementary products.The results indicate that,with the retailer-sponsored gift cards,the expected supply chain’s profit,consumer surplus,and total social welfare are the largest under unchanged wholesale prices and retail prices strategy.The expected supply chain’s profit improves more significantly for two products with similar(or identical)value.With the manufacturer-sponsored gift cards,the expected supply chain’s profit,consumer surplus and total social welfare are the largest under unchanged wholesale prices and retail prices strategy.The expected supply chain’s profit improves more significantly for a high-value promotional product coupled with a low-value redeemed product.Second,we study the design and optimization of the optimal gift card promotion strategy in a retailer power two-product supply chain.We construct a retailer power supply chain in which the retailer first decides the profit margins of the two products,and then the two manufacturers decide the wholesale prices separately.Based on the game model,we discuss the optimal strategies for retailer-sponsored gift cards and manufacturer-sponsored gift cards under three pricing strategies respectively.We further consider the impacts of consumers’ time-inconsistent behavior and a pair of complementary products.The results show that,with the retailer-sponsored gift cards,the expected supply chain’s profit is the largest under unchanged wholesale prices strategy.However,the consumer surplus and total social welfare are the largest under unchanged wholesale prices and retail prices strategy.With the manufacturer-sponsored gift cards,the manufacturer will not implement gift cards promotion when the wholesale prices are unchanged.Third,based on the different supply chain gift card strategies,we analyze the strategy choice for the two-product supply chain.To mitigate the conflicts of interest among the retailer and manufacturers,we design a cost sharing mechanism by taking reasonableness and fairness into consideration.Specifically,given a supply chain power structure,we compare the optimal retailer-sponsored gift cards strategy with the manufacturersponsored gift cards strategy.Thus,we construct and solve the optimal cost sharing ratios for the retailer and manufacturers.To maximize social welfare,we compare the four gift card promotion strategies to obtain the optimal strategy choice for the two-product supply chain.The results indicate that the total social welfare is the highest with retailersponsored gift cards in a retailer power supply chain.When the value of the promotional product is higher than the redeemed product,the total social welfare is higher with manufacturer-sponsored gift cards than with retailer-sponsored gift cards in a manufacturer power supply chain,and vice versa.In general,this dissertation has three innovative contributions as follows:(1)we reveal the impact of multi-product gift cards on consumers product demand by looking into the description and characterization of consumer decision-making behavior;(2)we derive a decision-making strategy for the supply chain with gift card promotion under different power structures by constructing and solving the dynamic games;(3)we establish a cost sharing mechanism for the supply chain with gift card promotion by taking reasonableness and fairness into consideration.