The impact of brand spillover marketing strategy on selling mode in an e-commerce platform supply chain

Abstract

In recent years, to better develop private brands (PBs), some e-commerce platforms may outsource their manufacturing to the same contract manufacturer as that of the original equipment manufacturer (OEM, also called national brand manufacturer) and actively advertise this relationship to promote their PBs. By employing a Stackelberg game, this paper studies whether the platform should use such a brand spillover marketing strategy in various selling modes and how the selling modes affect the brand spillover strategy. The results show that the two types of strategies influence each other. Specifically, when the PB power is small, the platform always adopts the brand spillover strategy, which enhances the OEM’s incentives to adopt the agency mode; when the PB power is intermediate, to combat the brand spillover strategy, the OEM may adopt the reselling mode to induce the platform to choose a different contract manufacturer from that of the OEM; when the PB power is large, the platform chooses not to implement the brand spillover strategy but uses the same (different) contract manufacturer as (from) that of the OEM under the agency (reselling) mode. Furthermore, the dark side of the brand spillover strategy’s impact on the platform exists, and a higher brand spillover level causes a lower probability that the platform adopts the brand spillover strategy under the agency mode. We also check the robustness of the results by studying two more scenarios.