Optimal cause marketing strategies for online platforms and third-party sellers: A spokes model analysis

Abstract

Under the advocacy of the platform, an increasing number of third-party sellers have implemented cause marketing (CM) strategies. The platform and sellers have achieved cumulative social benefits while pursuing profit. However, not all third-party sellers choose the CM strategy. To better understand the impact of online CM on pricing, profitability, and social welfare, we set up a stylized CM spokes model and analyze the impact of the unit donation amount, the number of cause marketing sellers, and consumers’ warm-glow effect on the optimal CM strategy. We find that the profitability of cause-related products is not always higher than that of non cause-related products when there exists sufficient competition between cause-related and non cause-related products. It is also found that higher unit donation amounts do not necessarily lead to greater total donations and social welfare. Moreover, having more sellers choose CM does not necessarily result in a higher total donation amount. Additionally, we explore another donation form, the donation rate, to determine the best CM strategy for sellers. The results show that a fixed donation is more flexible for sellers. Overall, our findings offer new insights into how platforms and sellers can optimally implement CM strategies.