Pricing and Timing Decisions in Promotion Channels

When planning for online promotion festivals, retailers must consider both pricing and timing decisions to determine an appropriate promotion strategy. In this article, we first consider retailer-promotion channel where the retailer sells a new product on his marketing channel in normal and promotion sales periods. A greater number of early consumers can reduce late consumers' risk perception for product performance and increase their utilities via word-of-mouth. Consumers arriving in the promotion sales period strategically time purchases to maximize their utilities. Our analysis shows that when word-of-mouth is strong and consumers are patient to wait for price markdown, the retailer increases the price from that of the normal sales period and then provides price discounts. Otherwise, the retailer sets a high initial retail price to earlier pursue high marginal profit. We then consider platform-promotion channel where the retailer sells the product on the platform. Our analysis suggests that three additional factors in platform-promotion channel, commission rate, subsidy level, and market expansion, have distinct impacts on the equilibrium pricing and timing decisions. Interestingly, we find that the retailer's profit can be nonmonotonic in the subsidy level and a higher subsidy level does not necessarily induce the retailer to engage in platform-promotion channel.