Trade deals and/or on-package coupons

Abstract

The selection of either a pull or a push price promotion has mainly been investigated in contexts where manufacturers offer deals to consumers at the time of purchase or offer trade deals to retailers. This paper extends this framework to where manufacturers can offer either trade deals or rebate-like promotions to consumers such as on-pack coupons that stimulate the first and second purchases or a combination of the two promotion vehicles. It is demonstrated that the decision to implement either of the three promotion options critically depends, among other factors, on the percentage of first-time buyers who redeem their coupons at the second purchase. Particularly, a necessary condition to simultaneously offer both a trade deal and coupons is to have a positive coupon redemption rate. When possible, manufacturers prefer on-pack coupons over trade deals to take advantage of slippage and to further increase the overall demand via coupon-induced repeat purchase. Manufacturers are more likely to take the lion's share of channel profits.

Managing advertising investments in marketing channels

“…Martín-Herrán et al (2010) investigate the conditions under which manufacturers of products such as automobiles and household appliances offer cash rebates to consumers at the time of purchase or trade deals to retailers. Martín-Herrán and Sigué (2015) consider the trade-off between trade deals and rebate-like promotions targeted at consumers such as on-pack coupons that stimulate the first and second purchases or a combination of the two promotional offers. These works offer frameworks that identify formal conditions under which manufacturers can adopt either one of these price-promotional activities.…”

“…Lastly, a few works deal with the fundamental issue of this research, which is how manufacturers should allocate their resources to own-controlled activities targeted at consumers as well as activities that aim at giving extra incentives to channel partners to perform specified tasks. These works are, however, limited to price promotional activities such as trade deals, rebates, and coupons (e.g., Gerstner and Hess, 1991a,b, ;Martín-Herrán and Sigué, 2015).…”

Dynamic pricing and coupon promotion strategies in a dual-channel supply chain based on differential game

“…They argued that the holding costs of coupons and the competitiveness of the coupon market are two main factors that influence the profits of the manufacturer and retailer. Martín and Sigué (2015) analyzed the impact of trade deals and coupon promotions on the supply chain enterprise's profit. Reimers and Xie (2018) demonstrated that coupons are a tool for price discrimination, which attracts new consumers.…”

“…Note that the brand image has a positive effect on market demand. Here, in line with Su et al (2014), Martín and Sigué (2015), and Li et al (2020b), we quote the classic linear demand function for brevity, that is, D=a−pfalse(tfalse)+ϵGfalse(tfalse)=a−pfalse(tfalse)+ϵ∫0∞true[G(t)′true]dt. Where a represents the market potential; ε indicates the elasticity coefficient of the brand image; ϵGfalse(tfalse) represents the brand image's linear increment for demand.…”

“…The design of price is the key entry point for channel integration (Zhou et al , 2019). Recently, supply chain enterprises have implemented various types of pricing strategies, for example, trade deals (Martín and Sigué, 2015), product bundling (Jiang et al , 2018), price discrimination (Bauner et al , 2019) and price discount (Taudes and Rudloff, 2012). It is interesting to note that coupon promotion, a practical approach for modeling pricing discounts, has become increasingly popular among pricing strategies (Reimers and Xie, 2018; Jia et al , 2019).…”