Equal Pricing or Free Pricing? The Pricing Strategies of B2C Platform

Abstract

B2C platform, who provides unprecedented opportunities to enterprises to directly access to the customers, often has resale channel and direct channel simultaneously. In resale channel it purchases the products from the manufacturer and then resells them to the customers; in direct channel it offers the platform to the manufacturer to sell directly and charges the manufacturer a proportion of fees. Since products sell via both channels, a challenging problem to B2C platform is that when should it implement equal pricing strategy (i.e., the retail price equals to the direct selling price) or free pricing strategy (they set the prices respectively). We compare the pricing strategies by using game-theoretical model. Analyses show two interesting findings: Firstly, equal pricing strategy can mitigate channel conflict; however, it does not necessarily increase B2C platform’s profits. Secondly, the choice of pricing strategy is affected by the customers’ channel preference: B2C platform prefers equal pricing strategy only when customers are resale channel oriented; otherwise it prefers free pricing strategy. However, to the manufacturer, it always prefers free pricing strategy and enjoys the freedom.