Product brand differentiation and dual-channel store performances of a multi-channel retailer

Purpose - The purpose of this paper is to provide a framework to help business marketers with online and traditional retail channels (multi-channel retailers) to find the optimal branding strategy and market structure in order to maximize their profits. Design/methodology/approach - A game-theoretic model is developed to determine the optimal branding strategy and market structure for the dual-channel stores of a multi-channel retailer. Findings - The paper demonstrates that an optimal branding strategy and market structure exists for the dual-channel stores of a multi-channel retailer. When a retailer uses multiple channels in parallel to sell its product, the optimal branding strategy is to employ as large as possible brand differentiation between the dual-channel stores, particularly when the price is less sensitive for consumers and the market base size is larger. Furthermore, it is also found that the optimal market structure is the Stackelberg mode, especially when the product brands between the two channels are less differentiated. Research limitations/implications - The present study assumed that all information is known to both the online and traditional channels of a multi-channel retailer. However, information could be incomplete. It is recommended that future research explore the value of product brand differentiation under incomplete information settings. Practical implications - The paper provides a very useful model framework, branding strategy, and market structure for business managers who are using or planning to use multiple channels to sell their products. Originality/value - This paper fills a conceptual and practical gap for a structured analysis of the current state of knowledge about multi-channel branding strategies. The paper provides practical and solid advice and examples demonstrating the application of product brand differentiation strategies for business managers.