Channel Strategies for Durable Goods: Coexistence of Selling and Leasing to Individual and Corporate Consumers

Tilson, Vera; Wang, Yunzeng; Yang, Wei

doi:10.1111/j.1937-5956.2009.01043.x

Cited by 21 publications

(8 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Furthermore, we focus on a steady-state equilibrium in our solutions, where the equilibrium values of all decision variables and the aggregate customer behavior are consistent over time. Rust (1985) and Konishi and Sandfort (2002) formally show the existence of this equilibrium in other contexts, as it has been utilized in the literature extensively (e.g., Agrawal et al 2012, Hendel and Lizzeri 1999b, Huang et al 2001, Rao et al 2009, Tilson et al 2009). We use this concept to examine the long-run behavior of the apparel firm and the customers.…”

Section: Solution Conceptmentioning

confidence: 99%

See 1 more Smart Citation

Trade‐In or Sell in My P2P Marketplace: A Game Theoretic Analysis of Profit and Environmental Impact

Vedantam

Demirezen

Kumar

2021

Production and Operations Management

View full text Add to dashboard Cite

A s more customers purchase pre-owned apparel, firms are increasingly adopting resale based business models. These models typically operate as either (i) a trade-in and resale program, wherein a firm offers a trade-in discount on a new product and resells the traded-in products, or (ii) a P2P resale marketplace where customers can buy and sell used products to each other. Since different firms choose different resale strategies, it is not clear which strategy is more profitable. Furthermore, although firms that adopt each resale model also promote their environmental benefits, there are concerns that these firms are greenwashing, that is, misrepresenting the environmental benefits of their business models. Hence, we investigate the profitability and environmental impacts of these resale marketplace models and find that the trade-in model may be more profitable despite the lower reverse logistics cost in the P2P model, and the P2P resale marketplace may be more profitable despite the trade-in program having direct control over the supply and demand of used products. Furthermore, both models can be better for the environment depending on the product characteristics and perceived quality difference between the used products sold in these programs. We further identify when each model is better for profitability and environment concurrently and when there is misalignment. Other results and managerial insights include comparative pricing of new and used products, market coverage, total sales, and resales, and the impact of product durability on pricing. The insights presented in this study provide useful guidelines for firms, non-governmental organizations, and environmental advocacy groups.

show abstract

Section: Solution Conceptmentioning

confidence: 99%

“…2009, Tilson et al. 2009). We use this concept to examine the long‐run behavior of the apparel firm and the customers.…”

Section: Customer Demand and Business Modelsmentioning

confidence: 99%

Trade‐In or Sell in My P2P Marketplace: A Game Theoretic Analysis of Profit and Environmental Impact

Vedantam

Demirezen

Kumar

2021

Production and Operations Management

View full text Add to dashboard Cite

show abstract

“…Bhaskaran and Gilbert (2009) analyze how the channel structure affects the manufacturer and dealers’ pricing and marketing strategies decisions, considering the competition among the dealers. Assessing the impact of the residual value of the products at the end of use on the consumers’ purchasing decisions, Tilson et al (2009) investigated the optimal pricing decisions and each market segment’s performance under the different settings of the channel and transactions cost. Agrawal et al (2012) are more concerned about the environmental impact of developing lease services, and developed the consumer choice model under Markov equilibrium and analyzed the cannibalization effect among different market segments.…”

Section: Literaturementioning

confidence: 99%

Recycling Versus Leasing in Closed-Loop Supply Chain: A Comparative Analysis Anchored on Consumer Ownership Perceptions

Chen,

Xu,

Dong

et al. 2023

SAGE Open

View full text Add to dashboard Cite

Manufacturers increasingly recycle end-of-life products to realize residual economic value and mitigate environmental impacts on the economic system. Concurrently, with the burgeoning growth of the product-service system, leasing models offer an alternative method to complete the material loop without direct collection. While prior research has delved into recycling channels, incentive mechanisms, and remanufacturing within closed-loop supply chain management, a comparative analysis between recycling and leasing strategies remains under-explored. This study seeks to bridge this gap by elucidating the manufacturer’s strategic decision-making process, factoring in consumers’ product ownership perceptions. We propose a manufacturer decision model anchored on consumer choices and segment it into three scenarios based on varying ownership perceptions. Our analysis contrasts market demand and profit outcomes across these scenarios. Notably, we discern that a hybrid strategy is optimal when ownership perception is low; however, when such perception is heightened, a dedicated recycling strategy proves more advantageous. Importantly, introducing a leasing option does not entirely overshadow the conventional sales market but is susceptible to being overshadowed itself. From a managerial standpoint, while integrating a leasing program might augment revenue streams, sole reliance on it is inadvisable. Furthermore, reshaping consumption paradigms to emphasize product functionality over ownership can pave the way for more expansive leasing strategies, optimizing revenue generation within a closed-loop framework.

show abstract

“…Tilson et al. (2009) study the behavioral impact on the sale of new products when a customer has access to used products. These considerations are not directly applicable to our B2B focus, where, for example, construction firms lease the equipment from OEMs when they need it for their projects instead of prolonging projects’ durations in anticipation of a drop in equipment prices.…”

Section: Introductionmentioning

confidence: 99%

OEM‐servicizing with a multiusecycle product: Model analysis and insights

Gao,

Bansal,

Guide

2023

Production and Operations Management

View full text Add to dashboard Cite

Customers of many OEMs in business‐to‐business markets today demand product‐servicizing in which instead of buying the product from the OEM they buy the use of a product during a lease. During the lease, (i) the customer uses the product and returns it to the OEM after the use reaches a specific level, (ii) the OEM remanufactures the product in a costly process and sends it back to the customer, and this usecycle is repeated multiple times. The lease terms typically involve a use‐based payment. While a greater product‐use by a customer brings a larger revenue to the OEM it also increases the remanufacturing cost incurred by the OEM. We investigate this tradeoff using an analytical model for a contract that is used extensively in industry. For the case of homogenous customers with a common use‐rate of the product, we optimize lease payment terms and identify market and product‐remanufacturing characteristics for which the OEM should servicize the product instead of selling it. We show that an OEM should not servicize a product when the customers' use‐rate exceeds a threshold. This is because beyond this threshold, the remanufacturing cost increases disproportionably, exceeding the higher usage based revenue. Subsequently, we consider a market with two segments with different use‐rates. We consider two servicizing modes: (i) servicize both market segments, or (ii) selectively servicize only one segment and sell the product to the other segment, and the default mode of selling in both segments. We develop optimal lease payment terms for these use‐based servicizing modes, identify thresholds of product and market characteristics for the optimality of these modes. Finally, we extend the results to a market with more than two segments, and compare the environmental impacts of the servicizing or sell decision. Numerical results informed by empirical data show that the OEM's loss of profit from choosing a sub‐optimal servicizing/sell decision can be significant.This article is protected by copyright. All rights reserved

show abstract

Channel Strategies for Durable Goods: Coexistence of Selling and Leasing to Individual and Corporate Consumers

Cited by 21 publications

References 14 publications

Trade‐In or Sell in My P2P Marketplace: A Game Theoretic Analysis of Profit and Environmental Impact

Trade‐In or Sell in My P2P Marketplace: A Game Theoretic Analysis of Profit and Environmental Impact

Recycling Versus Leasing in Closed-Loop Supply Chain: A Comparative Analysis Anchored on Consumer Ownership Perceptions

OEM‐servicizing with a multiusecycle product: Model analysis and insights

Contact Info

Product

Resources

About