Ingredient Branding with Branded Service

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Author(s): Juan Zhang (University of Science and Technology of China, China), Qinglong Gou (University of Science and Technology of China, China)and Xiaoyan Li (University of Science and Technology of China, China)
Copyright: 2014
Pages: 10
Source title: Encyclopedia of Business Analytics and Optimization
Source Author(s)/Editor(s): John Wang (Montclair State University, USA)
DOI: 10.4018/978-1-4666-5202-6.ch111

Keywords: Business & Management / Business Information Systems / Business Intelligence / Business Science Reference

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Abstract

Owing to the huge success of ingredient branding in industrial practice, an issue with increasing importance is how the pricing strategy affects the implementation of ingredient branding strategy. Noting the rapid development of the service industry, this chapter considers a situation in which a manufacturer selling tangible products procures complementary service products from a service firm, and consumers have to purchase them together. The complementary service firm builds up its goodwill through advertising efforts, which may finally influence the sales by an ingredient branding strategy. We propose an analytical model to make a joint decision on the ingredient branding strategy and pricing strategy of channel members. The service firm's advertising efforts on its goodwill levels are modeled in a modified Nerlove-Arrow framework. We provide in feedback form the optimal advertising and pricing policies for the service firm and the manufacturer. Managerial implications are also given.

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