Research On Advertising And Pricing Strategies For Omnichannel Retail

With the advancement of the Internet and mobile information technology,the traditional single retail channel has been unable to meet the growing shopping needs of consumers.Most retailers have been forced to integrate their channel structures.In this context,omnichannel has emerged with the combination of brick-and-mortar store,mobile APP,and e-commerce platform.While,how to collaborate the channels in omnichannel by marketing tools such as advertising and pricing is crucial to omnichannel retailers.In practice,an omnichannel retailer model can be a multi-entity cooperative structure formed by an online platform and an offline store.Thus,this paper explores how omnichannel retailers can make effective advertising and pricing strategies to maximize the collaborated advantage of omnichannel based on the characteristics of consumer behavior and channel structure in different situations,i.e.,singleentity advertising and multi-entity advertising.Specifically,the following research content is included.First,considering the effect of consumer free-riding behavior,the issue of omnichannel collaboration is discussed in the case of single retailer advertising.Assume that both online and offline retailers cooperate to provide BOPS(Buy-Online-Pick-up-in-Store)services,the study compares the optimal advertising and pricing strategies under decentralized decision making to centralized decision making.And it proposes a BOPS-based omnichannel two-part revenue coordination model to examine the omnichannel collaboration strategies for the effect of consumer free-riding behavior.The result shows that,under centralized decision-making,when consumers have a greater(smaller)preference for the online channel,as the proportion of freeriding consumers increases,omnichannel should increase(decrease)the prices of online and offline products,and increase(decrease)the delivery of offline advertising.Under decentralized decision-making,it cannot achieve omni-channel profit coordination,the two-part revenue coordination mechanism proposed in this paper can realize the profits of both online and offline retailers are higher than those in decentralized decision-making,and can make the overall omnichannel profit reach the profit level of centralized decision-making,achieving a win-win effect.Second,the above single-period advertising and pricing decisions are extended to a twoperiod dynamic model to investigate omnichannel two-period advertising and dynamic pricing strategies while taking consumer strategy behavior into account.Based on the principle of maximizing consumers’ utility in two periods of different channels,three advertising decision models are constructed based on consumers’ channel choice and purchase timing,namely,the retailer will not place ads during two periods,place ads during the normal period,and place ads during the discount period.The optimal response mechanism of omnichannel retailer is analyzed.The result shows that,when the consumer’s strategic level is low,the retailer chooses to advertise in the normal period(discount period),with higher(lower)price for products in the normal period and lower(higher)price for products in the discount period.When the consumer’s strategic level is high,the price of the product during the discount period will be higher under the strategy of no ads in the two periods,and the retailer can increase the twoperiod price adjustment space through advertising.The retailer’s optimal advertising level under the normal advertising strategy is greater than the discount advertising strategy.Retailer sends advertising during the normal period or in the discount period is beneficial to the normal period of sales.Third,considering the influence of the consumer price reference effect and advertising effect on the market demand of different channels,the study investigates the omnichannel dynamic pricing strategy based on BOPS channel cooperation.By constructing dynamic equations affecting the revenue of the online and offline retailers,this study explores the impact of the price reference effect,advertising effect,and channel commission parameters on the optimal retail price and the revenue of the online and offline retailers with three pricing strategies: basic pricing,static pricing and dynamic pricing strategy considering the reference effect.The results show that,under static or dynamic pricing strategies,the optimal advertising level and pricing are positively correlated with the initial reference price.The optimal online and offline pricing strategies are similar to the skimming pricing strategy(penetration pricing strategy)when the initial reference price is higher(lower).The evolution rules of omnichannel optimal steady-state prices and profits based on BOPS channel cooperation with different system parameters are different.The online and offline retailers should design optimal pricing strategies based on the consumer price reference effect,the advertising effect level,and channel commission to enhance their profitability.Fourth,the research further extends single-entity advertising to multi-entity cooperation and explores the issue of omnichannel collaboration in the case of advertising cooperation.Consider an omnichannel supply chain system in which a manufacturer and a retailer cooperate to provide the BOPS service,and the manufacturer shares the retailer’s local advertising cost.Based on consumer channel preference and market segmentation,the impact of advertising cooperation on omnichannel supply chain profits is explored.The results show that,the higher the BOPS channel commission level,the higher the manufacturer and retailer’s pricing.Advertising cooperation strategies will promote the manufacturer and retailer to improve advertising levels and,in most cases,increase market demand.Advertising cooperation in the omnichannel mode does not always increase the profit of the retailer.The omnichannel supply chain should design advertising cooperation strategies to increase overall profit levels based on different channel combinations and consumer characteristics.Finally,this work further extends the omnichannel advertising cooperation to the situation of horizontal advertising competition between online and offline retailers.The theoretical models are constructed from two dimensions: the consistent and inconsistent pricing between online and offline,and fixed or optimal pricing after implementing BOPS cooperation,respectively,to study the effects of BOPS cooperation on omnichannel advertising competition and pricing strategies,and analyze the competing relationship between online and offline retailers under different pricing strategies.The results show that,in the case of consistent and inconsistent pricing situations,implementation of BOPS cooperation is not always optimal for the online and offline retailers;compared to a consistent pricing strategy,the online retailer can make a higher profit with an inconsistent pricing strategy,while the offline retailer obtains higher profit with a higher price under consistent pricing strategy than under the inconsistent pricing strategy.On the other hand,in the case of fixed and optimal pricing after implementing BOPS cooperation,the BOPS convenience coefficient can partially compensate for the competitive effect of advertising in the optimized pricing strategy;when BOPS commission is high and offline hassle cost is low,the online and offline retailers can obtain higher profits from the optimized pricing strategy compared to the fixed pricing strategy.In summary,this paper takes omnichannel retailing as the research background and discusses how omnichannel retailers,which include online,offline,and BOPS channels,can develop effective advertising and pricing strategies in different situations,i.e.,single-entity advertising and multi-entity advertising.The study contributes to the literature on omnichannel by introducing different consumer behavior characteristics and channel structure characteristics to systematically explore the issue of omnichannel advertising and price marketing strategies.Moreover,the study considers channels hassle costs,consumer channel preferences as well as channel commission in different situations,including single-period decision to dynamic decision,advertising cooperation to advertising competition.The study enriches and develops the theory of omnichannel retail management from the perspective of new retail,and provides theoretical support and practical guidance for actual omnichannel retailers’ marketing decisions.