Supply chain sales promotion : the operations and marketing interface

by 1978- Yang, Shilei

By Shilei Yang, Ph.D. Washington State University August 2007 Chair: Charles L. Munson Supply chain sales promotion is critical to the organizations in the channel due to complications with hooking up manufacturers, retailers and consumers together. This dissertation analyzes models discussing supply chain sales promotion under collaboration between the operations and marketing disciplines. Borrowing from the marketing empirical research on consumers’ slippage behavior, this research focuses on the optimal use of mail-in rebate promotions in conjunction with other promotional tools to maximized supply chain profits. Related literature is organized in Chapter 2. Following the literature review are three independent modeling chapters. Chapter 3 uses a utility function approach to study the manufacturer’s profitability with two promotional strategies: rebates and v manufacturer’s suggested retail prices (MSRP). The results show that the manufacturer’s optimal strategies are jointly determined by the slippage rate and magnitude of loss aversion. Chapter 4 uses a newsvendor modeling framework to study coordinating issues between the manufacturer and the retailer when the manufacturer provides rebates to consumers and the retailer exerts promotional effort to further spur demand. The results show that a quantity discount contract is enough to coordinate a supply chain under a typical deterministic demand model. For stochastic demand, a quantity discount contract plus buy-back can coordinate the supply chain. Chapter 5 uses an economic order quantity (EOQ) modeling framework to study the retailer’s choices of promotional strategies: rebate promotions or everyday low prices. The results show that the retailer’s decision making depends upon several important factors including the demand price sensitivity and the regular undiscounted retail price on market. These research results provide insights for both operations managers and marketers to facilitate proper choosing and designing of sales promotions over a supply chain. Furthermore, scholars interested in cross-disciplinary studies between operations and marketing can utilize the work here as a springboard to explore a wide range of future applications. vi vii