Two Essays in Retailing
Abstract
The objective of the two essays is to understand strategic decision of consumers and firms. The first essay investigates consumers’ information search and its influence on the final choice. The second essay investigates antecedents and consequence of manufacturers’ product returns. In the first essay, I propose a structural model of consumers’ sequential quality search behavior in a market with a large number of alternatives. I estimate this model using data from the automobile industry. I propose that using micro-level survey data with purchase and consideration information can help estimate search costs. I run counterfactual simulations to understand how test drive promotion for a focal car would change its consideration and choice share. Under the $100-paying simple test drive promotion, I show that running the test drive promotion can be more beneficial for the cars the small size car segment. I also show how the proposed model and results can benefit the firm to design competitive test drive promotion by taking Suzuki Kizashi as an example. The counterfactual simulation identifies the optimal choice of competing cars to include in the competitive test drive promotion. The second essay investigates two key questions on manufacturer returns, or buy-back, in a manufacturer-retailer channel: (1) when should manufacturers offer buy-back to retailers and (2) how manufacturers’ buy-back decisions influence their own- and the retailers’ marketing strategies. To do so, we first construct a decision process framework depicting the manufacturer and retailer in the manufacturer-retailer channel, based upon which we generate a number of hypotheses regarding the antecedents and consequences of manufacturer returns. This paper finds that the buy-back policy significantly affects the manufacturers’ and the retailer’s decisions on pricing and promotion. For example, in certain product categories, buy-back helps prevent a manufacturer’s product from being discounted, suggesting that buy-back can serve as an alternative for resale price maintenance and channel coordination. We also find that manufacturers tend to run more trade promotions for the product that they offer buy-back if the product category is more seasonal and experiential goods category.
Degree
Ph.D.
Advisors
Li, Purdue University.
Subject Area
Marketing|Management
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