Quality-differentiated distribution strategies between live streaming and online channels

Abstract

To address the challenges posed by the emergence of live streaming (LS) channels and mitigate competition among different distribution channels, manufacturers are increasingly adopting quality-differentiated distribution strategies. In this study, we develop a model involving a manufacturer and an influencer to investigate the following two potential strategies: the HL strategy (where high-quality products are marketed via the LS channel while low-quality products are marketed via the traditional online channel) and the LH strategy (where low-quality products are marketed via the LS channel while high-quality products are marketed via the traditional online channel). Moreover, we categorize products into cost-driven and demand-driven types to explore the factors that influence a manufacturer's strategic choice of different types of products. Our key insights are as follows. First, manufacturers should focus on the following two factors: product type and influencer ability. When products belong to cost-driven category and the influencer possesses high ability, implementing the LH strategy can lead to a mutually beneficial outcome for both parties. Furthermore, when the influencer's ability is low, achieving a win‒win situation for both parties becomes unattainable, regardless of the type of product. Second, the pricing of low-quality products may not necessarily be lower than that of high-quality products. When products belong to demand-driven category and the influencer's ability is high, manufacturers can set a higher price point for low-quality products when selling them through the traditional online channel. Third, the influencer exhibits varying preferences for product quality when selling different types of products. When products belong to demand-driven category, the influencer prefers selling high-quality products. Conversely, for cost-driven products, the influencer favors low-quality products. If there is a mismatch between the manufacturer's strategy and the influencer's preference, then the influencer tends to minimize its losses by reducing its LS effort. Fourth, from the perspective of consumer surplus and social welfare, our analysis reveals that the HL strategy yields a higher level of consumer surplus and contributes more to social welfare for demand-driven products; but for cost-driven products, the LH strategy emerges as the more favorable choice.