The Effect Of Brand Awareness And Quality Ambiguity On Manufacturers'Channel Strategy

In existing literatures about manufacturers' channel strategy,few scholars have considered brand awareness and quality ambiguity.However,the two factors play important roles in consumers' decisions.By taking brand awareness and quality ambiguity into consideration,I construct a bounded rational model to characterize these two factors.Based on this model,I explore the pricing,demand and profits under different channel structures in a duopoly and under what conditions the Nash equilibrium exists.The channel structures I studied include both manufactures use direct channel(DD),one manufacture use direct channel and another use indirect channel(RD or DR)and both manufactures use indirect channel(RR).I found that consumers' brand awareness and quality ambiguity have a positive impact on products' pricing(including retail prices and wholesale prices).In addition,brand awareness and quality ambiguity can prevent demand from flowing between manufactures.For high quality manuafactures,they should reduce the two factors so that consumers can realize their high quality.For low quality manufactures,they should increase brand awareness and quality ambiguity to avoid demand loss.With brand awareness and quality ambiguity increase,manufactures' profits decrease firstly and then increase.When the brand awareness and quality ambiguity are low,the manufacturer can obtain more profit through product competition and when brand awareness and quality ambiguity are high,manufacturers can also get more profits.Besides,when brand awareness and quality ambiguity can bring more profits to manufacturers,DD is Nash equilibrium.Otherwise RR is Nash equilibrium.Besides,if consumers' brand preference is not obvious,RR always strictly dominates RD and DR.If brand awareness and quality ambiguity can only bring more profit to a certain manufacturer,then the manufacturer chooses the direct channel,and the other chooses the indirect channel as Nash equilibrium.Finally,I also study the impact of product quality on pricing,demand and profits through numerical experiments and results show that the increase of product quality has a positive influence.The effects of brand awareness and quality ambiguity on retailers'profits are similar with manufacturers'.In the end,with the brand preference increases,the preferred manufacturers will always obtain more profits.Surprisingly,the unpreferred manufacturers' profits also increase in a certain range.