How to Promote Sales: Discount Promotion or Coupon Promotion?

In this paper,we examine how a merchant should choose between discount promotion(offering a discount through an online third-party promotion platform)and coupon promotion(ssuing on-package coupons directly to consumers).We develop a two-period model in which the merchant optimizes the promotion decision in the first period and does not promote in the second period.We identify two consumer segments:informed consumers who are aware of the merchant's offering at the beginning of the first period and know the true quality of the product,and uninformed consumers who are not aware of the merchant's offering at the beginning of the first period and underestimate the product quality.Moreover,the merchant has access only to informed consumers when adopting coupon promotion or when choosing not to promote,while the merchant can access both informed consumers and uninformed consumers when offering discount promotion.In this setting,we find that the merchant should offer discount promotion when the quality estimation of uninformed consumers is large and/or when the proportion of informed consumers is small;otherwise,the merchant should adopt coupon promotion when the effect of coupons in the first period is large and choose not to promote when the effect of coupons in the first period is small.

Impacts of Platform’s Omnichannel Coupons on Multichannel Suppliers

While coupons that can be redeemed only in online channels have been issued by e-commerce platforms for decades, a new type of platform’s coupons, i.e., omnichannel coupons, which can be redeemed in both online and store channels, is gaining popularity with the rise of the omnichannel retail mode. It is interesting to explore the conditions under which omnichannel coupons are more advantageous to platforms and multichannel suppliers that sell products through platforms and physical stores. Two game models are developed in two cases where an e-commerce platform offers single channel coupons or omnichannel coupons for a multichannel supplier. Two scenarios are considered: one in which a consumer’s valuation of a product that fits his or her need is homogeneous and another in which the valuation is heterogeneous. Equilibrium outcomes show that under the homogeneous scenario, the product price and coupon face value in both coupon modes increase with the product’s fit probability when the cross-selling revenue is high, while decrease with the product’s fit probability when the cross-selling revenue is low. However, under the heterogeneous scenario, the price in both modes increases with the product’s fit probability only when the supplier’s loss from returns is low and the cross-selling revenue is high, and the coupon face value always decreases with the product’s fit probability. Compared with single channel coupons, omnichannel coupons may lead to a higher product price under certain conditions. Furthermore, omnichannel coupons can lead to higher total demand and benefit both the platform and the supplier if and only if the product’s fit probability is low and the supplier’s loss from returns is high. An extension shows that the platform’s preference for omnichannel coupons is weakened when the supplier offers a partial refund policy.