Three essays on marketing-finance interface and retailing

Di, Chenchen

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https://hdl.handle.net/2142/115875 Copy

Description

Title

Three essays on marketing-finance interface and retailing

Author(s)

Di, Chenchen

Issue Date

2022-06-27

Director of Research (if dissertation) or Advisor (if thesis)

Liu, Yunchuan

Doctoral Committee Chair(s)

Liu, Yunchuan

Committee Member(s)

• Rindfleisch, Aric
• Bao, Ying
• Narang, Unnati

Department of Study

Business Administration

Discipline

Business Administration

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Marketing-finance interface
• Retailing

Abstract

Seller-initiated consumer financing is a prevalent yet understudied phenomenon in marketing, especially in a distribution channel where a supplier offers trade credits to a retailer for selling the supplier's products and the retailer offers credits to consumers. In this dissertation, I study how the supplier prices its product and chooses the channel structure both financially and operationally with the default risk of both consumers and the retailer when consumers can purchase a product using seller-initiated financing. In addition, I also study ad platform and retail media's consumer data sharing strategy and suppliers bidding strategy with competition. In Essay 1 "Consumer Financing and Credit Pass-Through in Distribution-Financing Channels", I study whether the retailer will pass through the trade credits from the supplier to consumers through consumer financing, and how firms make strategic decisions both financially and operationally with consumer default risks and the retailer bankruptcy risk. With consumer default risks, I find that if the product marginal cost is low, retailer-initiated financing can expand the market, and a retailer may offer credits to consumers even knowing consumers cannot pay off in the future. With the retailer bankruptcy risk, I show that surprisingly a financially distressed retailer may offer consumer financing whereas a non-distressed retailer does not, i.e., a financially distressed retailer has higher credit pass-through than a non-distressed retailer, which is due to the supplier's incentive to strategically lower its wholesale price to alleviate the retailer's bankruptcy risk (i.e., risk shifting effect). Interestingly, this risk shifting effect happens only if the retailer has the capability to offer consumer financing under certain conditions. Moreover, consumer financing by the retailer, which offers consumers the opportunity to buy products which they could not afford otherwise, can make consumers worse off. The second essay "Seller-Initiated Consumer Financing and Consumer Sales-Finance Conflicts", I study the conflicts between sales divisions and consumer finance divisions in firms when firms both sell their products and provide financing to consumers, especially in a competitive market. I design a game-theoretical model to study the interdependence and conflicts between a sales division and a consumer finance division within a firm. The sales division decides the product price to maximize sales profits and relies on the consumer finance division to provide financing to consumers, while the consumer finance division decides whether to finance consumers’ purchase to maximize interest profits and limit default loss which are affected by the sales price of the sales division. I model the competition of two competing firms with internal sales-finance conflicts and study how competing firms’ internal sales-finance conflicts affect the external interfirm competition on both pricing and consumer financing. While conventional wisdom suggests that a centralized firm where the sales and consumer finance divisions are integrated would benefit the firm, I show that in a competitive market, a decentralized firm where the sales and consumer finance divisions make price and financing decisions separately can benefit from the conflicts between the sales and consumer finance divisions and gain more profits than a centralized firm. Moreover, strikingly, competition can benefit a firm, i.e., a firm with the internal conflicts between its sales and consumer finance divisions can earn a higher profit with another competing firm in the market than without. I also expect to show that the conflicts between a sales division and a consumer finance division of a firm can affect consumer welfare through pricing and consumer financing, and the seemingly dysfunctional and uncoordinated conflicts between the sales and consumer financing divisions of a firm can actually benefit consumers. In the third essay "Online Retail Media, Data Sharing and Consumer Purchase Funnel", I study ad platform and retail media's consumer data sharing strategy. I build a model consists of an ad platform, a retailer with or without ad network and two competing suppliers. Consumers are heterogeneous in their preference as well as their state in purchase funnel: consumers on ad platform are more likely to be in a browsing stage whereas the consumers on retail platform are more close to purchase in their purchase funnel. Considering consumers state and preference, I allow the suppliers/advertisers to choose their bidding strategies on ad platform (e.g. Google) and retail media (e.g. Amazon), if possible, to optimize their profits. Interestingly, I show that first, when the retailer does not have retail media, platform sharing data with suppliers is better than not sharing for suppliers and retailers. Second, when the retailer has the retail media, the ad platform, the retailer and suppliers are better off compared to benchmark where the retailer does not have retail media (win-win-win). Third, retailer advertising can be substitutes or complement to the platform advertising.

Graduation Semester

2022-08

Type of Resource

Thesis

Copyright and License Information

Copyright 2022 Chenchen Di

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