A Hybrid Firm's Pricing Strategy in Electronic Commerce Under Channel Migration
- Authors
- Kauffman, Robert J.; Lee, Dongwon; Lee, Jung; Yoo, Byungjoon
- Issue Date
- 2009
- Publisher
- ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
- Keywords
- Business policy; channel migration; channel-switching costs; e-commerce; empirical research; hybrid firm; loyalty; marketing; on-line channel; pricing models; pricing strategy
- Citation
- INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE, v.14, no.1, pp.11 - 54
- Indexed
- SCIE
SCOPUS
- Journal Title
- INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE
- Volume
- 14
- Number
- 1
- Start Page
- 11
- End Page
- 54
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/118719
- DOI
- 10.2753/JEC1086-4415140101
- ISSN
- 1086-4415
- Abstract
- Achieving an effective business design across the Internet and the off-line channel is a critical concern for a hybrid firm's choice of pricing strategy. Two pricing models are proposed to examine how consumer channel migration (one-way channel interaction from the traditional sales channel to the Internet) affects pricing strategy. One model has no interaction between the Internet and off-line channels. The other includes the possibility of one-way migration to the Internet channel and incorporates consumers' channel-switching costs and loyalty to the firm. The two models offer interesting results for understanding traditional and Internet-based selling. A high level of channel migration leads a firm to manage the two channels as one. With low channel migration, in contrast, the firm should optimize and manage each channel separately. The models had two main findings: (1) the level of channel migration determines a hybrid firm's pricing strategy; (2) a hybrid firm's price-level choice should be determined by the on-line demand proportion of its business. The modeling results were validated with empirical analysis for 10 large South Korean e-commerce firms by comparing prices in different product categories for various types of hybrid firms and Internet-only firms. This research offers new marketing strategy insights for managers of hybrid firms who wish to optimize price-setting decisions based on interactions between distribution channels and the intensity of the firm's involvement in the on-line channel.
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