Impact of cost structure and cannibalisation on live streaming pricing strategies

Abstract

Live streaming, as a new online selling channel, has gained popularity in recent years. However, introducing live streaming does not necessarily enhance the profitability of a brand. Strategic success hinges on accurately assessing when to introduce live streaming and crafting a reasonable pricing strategy. In essence, the introduction of live streaming complicates consumers' purchase decisions and intensifies channel cannibalisation from three standpoints: consumers' perceived value for products, consumers' purchasing cost among channels, and pricing strategy of the live streaming channel. Considering these factors, we construct models without and with live streaming and examine two pricing strategies, i.e., low pricing in the live streaming channel (low pricing strategy), and unified pricing in the live streaming and online direct channels (unified pricing strategy), to analyse the strategic integration of live streaming for dual-channel brands, thereby facilitating channel management and pricing strategies. The findings reveal that (1) brands should avoid introducing live streaming when consumers' cost of purchasing through the offline channel is either excessively high or low, opting instead to introduce it when the offline purchasing cost is moderate. (2) If consumers' cost of purchasing through the live streaming channel is low, the brand should implement the low pricing strategy; otherwise, adopting the unified pricing strategy becomes more appropriate. (3) The live streaming channel price after its introduction is higher than the online direct channel price without the introduction of live streaming. (4) When the brand introduces live streaming with the optimal pricing strategy, it not only boosts the brand's revenue but also enhances consumer surplus, achieving a win-win outcome for both the brand and consumers.