Membership‐Based Price Welfare Strategies in Retail Platforms: Coupons Versus Discounts

ABSTRACT In recent years, platform‐led paid membership programs have become a popular marketing strategy. We develop a three‐stage Stackelberg game model including a platform, a third‐party seller, and heterogeneous consumers and investigate two membership strategies in the online retail platform: coupon strategy or discount strategy. We find that the coupon strategy is more effective in stimulating market demand, while the discount strategy can extract more consumer surplus through price discrimination. Moreover, regardless of the discount rate, when the platform sets a small (large) coupon denomination, the retail price, the seller's profit, membership cost, and membership fee under the coupon strategy are all lower (higher) than those under the discount strategy. Interestingly, the moderate coupon denomination gives the seller and the platform more flexible profitability, specifically through low retail price and membership cost, allowing sellers and platforms to earn high profit and membership fee, respectively. Furthermore, we show that when the platform sets a high commission, it is optimal for the platform to adopt the coupon strategy; when the platform sets a low commission and there is a large proportion of nonmembers in the market, it is optimal to adopt the discount strategy. Otherwise, the platform should not implement membership strategies. Our research provides inspiration and insights for retail platforms to implement membership programs.