The paper aims to clarify the effects of brand differentiation on the platform's formulation of channel strategy and help the online platform formulate the optimal channel strategy, which involves selecting a proper selling mode for each brand.
The paper develops a multistage game model consisting of one online platform and two competing manufacturers with differentiated brands and examines the effects of brand differentiation on these three channel members' profits under each candidate channel strategy.
The results show that the platform prefers to offer the reselling mode for both brands when the brand differentiation is low, and this preference will be enhanced by the decrease in order fulfilment cost. By contrast, when the brand differentiation is high, it will offer the reselling mode for the premium brand but the marketplace service for the economy brand if the order fulfilment cost is not high; or the marketplace mode will be offered to both brands if this cost is high.
This study assumes that the order fulfilment costs of platform and manufacturer are fixed and symmetric. Therefore, researchers are encouraged to consider asymmetric costs of order fulfilment.
The paper guides the online platform to formulate the optimal channel strategy for differentiated brands and provides managerial insights for differentiated brands entering online markets.
This paper explores platforms' optimal channel strategy by jointly considering the effects of brand differentiation and investigates the impacts of brand differentiation on the optimal decision making under four candidate options. Moreover, this paper has been extended to examine the case when the manufacturers' production costs cannot be neglected.
