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The optimal encroachment strategy of private-label considering the quality effort and platform’s e-word-of-mouth

Author

Listed:
  • Zhitang Li

    (Northeastern University)

  • Cuihua Zhang

    (Northeastern University)

  • Ruxia Lyu

    (Northeastern University)

  • Yong Ma

    (Northeastern University)

Abstract

Motivated by the observed private-label products entering the market, this paper studies the encroachment of private-label manufacturers considering the quality effort and the platform’s e-word-of-mouth. We analytically derive that customer brand recognition ability and the e-word-of-mouth (e-WOM) gap of different platforms have an impact on the private-label manufacturer’s quality effort and price. Moreover, the higher the willingness to pay for the quality effort cost, the more effective the private-label encroaches market through platform channel. In addition, we find the weaker the customer’s brand recognition ability, the higher the profit of the platform with good e-WOM in the face of the encroachment of private label through the platform with good e-WOM. However, in the face of the encroachment of private label through bad e-WOM and direct channel, the profit of platform with good e-WOM is lower. The e-WOM gap of the platform has a feeble impact on the profit of the brand manufacturer and platform. Furthermore, we find when customer brand recognition ability is high, the optimal encroachment channel for private label manufacturers is the platform with good e-WOM; when customer brand recognition ability is moderate, the optimal encroachment channel for private label manufacturers is the platform with bad e-WOM; when customer brand recognition ability is high, the optimal encroachment channel for private label manufacturers is direct channel.

Suggested Citation

  • Zhitang Li & Cuihua Zhang & Ruxia Lyu & Yong Ma, 2024. "The optimal encroachment strategy of private-label considering the quality effort and platform’s e-word-of-mouth," Electronic Commerce Research, Springer, vol. 24(3), pages 1681-1712, September.
    • Handle: RePEc:spr:elcore:v:24:y:2024:i:3:d:10.1007_s10660-022-09572-6
    DOI: 10.1007/s10660-022-09572-6
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