Pricing Strategies For Service-oriented Manufacturing Firm Based On After-sales Service

With the globalization of the economy and the development of manufacturing technology, the product homogeneity phenomenon is getting worse. More and more manufacturers are attempting to add value to products and obtain differentiated competitive advantages by providing differentiated services as well as satisfy customer’s individual needs. Thus a new manufacturing model named service-oriented manufacturing has emerged with the continued integration of manufacturing and services. By providing services to customers before and in the sale of products, service-oriented manufacturers can realize the increase of customer value as well as the product’s differentiation, while service support in the aftermarket enables service-oriented manufacturers to extend the value chain. Owing to the extension to the aftermarket, service-oriented manufacturers are essential to focus on the profits both from sales of products and aftermarket service.This paper firstly gives a theoretical overview of service-oriented manufacturing and pricing strategies against the two-stage pricing problems of product and aftermarket service for service-oriented manufacturers in the differentiated competition market. On this basis, by using the method of game theory, we analyze the pricing decisions when providing undifferentiated service in the monopoly and duopoly market, as well as providing differentiated services in the duopoly market respectively. In the section of providing undifferentiated service, we first analyze the optimal pricing for different sales strategies in the monopoly market, and then analyze the sales strategy selection and optimal pricing for duopoly firms under different decision-making orders. In the section of providing differentiated services, we perform the analysis and comparison of pricing decisions from different forms by model optimality analysis and numeral simulation, demonstrating that both duopoly firms can benefit from aftermarket when providing differentiated services. The results have certain use for reference for service-oriented manufacturers when pricing the product and aftermarket services.