Implementation of Manufacturer and Reseller Interaction Models, Taking Into Account Advertising Costs
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Date
2019-11
Journal Title
Journal ISSN
Volume Title
Publisher
Blue Eyes Intelligence Engineering and Sciences Publication
Abstract
Establishing effective cooperation between the
manufacturer and reseller as vertical marketing channel
participants implies the effective mechanism for the development
of the main strategies of their business behaviour, such as price
and expenditure forming for the joint promotion of the product.
This provides the manufacturer and reseller the ability to select
the most appropriate business game scenarios to maximize their
profits in the short and long-term perspectives. This issue is
relevant in the practice of distribution channels functioning. The
purpose of the study is defining the optimal parameters values of
expenditure function reaction for the compatible advertising,
which will help to maximize the profits of both distribution
channel participants. The research takes into account the
statistical analysis of empirical data, in particular, data on
average monthly sales volumes, as well as retail price for the unit
of the product of the manufacturer enterprise. Besides, the paper
presents a numerical experiment on the possible values of the
advertisement expenditures parameters’ function, calculated on
the basis of effectively selected range and step change. It was
mathematically substantiated and defined the solutions of
Stackelberg's business game, which implies functioning of the
manufacturer equilibrium. A numerical experiment was
conducted to maximize the possibilities of the manufacturer’s
profitability features, reseller and marketing channel from the
point of pricing strategies formation, and expenditure strategies
for joint advertising of the both participants of the goods turnover
channel. Stakelberg's variant of a business game is found to be
optimal for the manufacturer, in which the percentage of its
participation in the reseller’s expenditures on the joint advertising
is non-zero. The obtained results can be the initial information
base to form recommendations on possibilities of Stakelberg’s
business game application in comparison with other variants of
theoretical and game models of marketing channels’ participants
interaction.
Description
Keywords
Stackelberg equilibrium, function of consumer demand, strategy of business behaviour, transfer price, retail price, joint advertising
Citation
Implementation of Manufacturer and Reseller Interaction Models, Taking Into Account Advertising Costs / Tetiana Bludova, Nataliya Danylyuk, Oleksandr Dyma [et al.]. – 2019. – Vol. 8, Iss. 4, November. – P. 4727–4736.