Trade-in operations under retail competition: Effects of brand loyalty*

Tang, Fei, Dai, Ying, Ma, Zu-Jun and Choi, Tsan-Ming ORCID: 0000-0003-3865-7043 (2023) Trade-in operations under retail competition: Effects of brand loyalty*. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 310 (1). pp. 397-414.

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Official URL: http://dx.doi.org/10.1016/j.ejor.2023.03.020

Abstract

Trade-in promotions are increasingly recognized as an effective strategy in retail operations to boost sales. Retail firms can restrict their trade-in programs to current consumers through an exclusive trade-in program or accept trade-ins from competitors’ consumers through a nonexclusive trade-in program. Moreover, consumers may build brand loyalty towards the products they have used and thus affect their future trade-in choices. However, the effects of brand loyalty on trade-in strategies in a competitive market remain underexplored. To bridge this gap, this study analytically examines the impact of brand loyalty on exclusive and nonexclusive trade-in programs by developing a stylized duopoly model. The results show that as a defensive strategy, an exclusive trade-in program effectively retains consumers when brand loyalty is sufficiently weak. Conversely, as an offensive strategy, a nonexclusive trade-in program is more likely to attract competitors’ consumers. An exclusive trade-in program is always the dominant strategy for both firms compared with the no trade-in benchmark. However, a nonexclusive trade-in program is better for both firms when brand loyalty is sufficiently strong. Moreover, an exclusive trade-in program benefits firms with a high proportion of trade-in-sensitive consumers. In contrast, firms with a high proportion of the overall consumer base benefit from a nonexclusive trade-in program. The results not only support trade-in practices but also provide important practical implications related to trade-in competition for policymakers.

Item Type:	Article
Uncontrolled Keywords:	Retailing, Trade -in competition, Brand loyalty, Consumer choice, Price discrimination, Exclusive trade-in
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	31 Mar 2023 15:03
Last Modified:	29 Jun 2023 01:38
DOI:	10.1016/j.ejor.2023.03.020
Open Access URL:	https://doi.org/10.1016/j.ejor.2023.03.020
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3169405