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Chinese Journal of Management Science ›› 2020, Vol. 28 ›› Issue (6): 146-157.doi: 10.16381/j.cnki.issn1003-207x.2020.06.014

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Online Interpersonal Group-buying Mechanism Considering Consumer Segmentation

HU Feng-ying1, ZHOU Zheng-long2, LU Xin-yuan2, PU Xu-jin3   

  1. 1. Business School, Hubei University, Wuhan 430062,China;
    2. School of Information Management, Central China Normal University, Wuhan 430079,China;
    3. School of Business, Jiangnan University, Wuxi 214122, China
  • Received:2018-11-16 Revised:2019-06-26 Online:2020-06-20 Published:2020-06-29

Abstract: Based on the innovative marketing mode with two sale prices, over the last two years, online interpersonal group buying mode have rapidly become popular among many sellers and consumers in China. However, in relevant literature, there aren’t the theoretical analysis relating to the interpersonal group-buying mechanism or comparative studies of interpersonal group buying and traditional selling (such as uniform-pricing trading) have been found. In order to fill this research gap, the uniform-pricing trading is added for comparison in order to explore differences between interpersonal group buying and uniform-pricing trading in terms of profitability and consumers’ surplus. In the research process, this paper focuses on segmenting the consumer population to reduce the dispersion of consumer value to extract consumer surplus. Furthermore, for the same goods, consumer value under the separate selling mode may be more dispersed than the value under the interpersonal group buying mode. Thus, the separate selling mode is added to compare and analyse the profitability and consumer surplus of the separate selling mode and interpersonal group buying mode to provide more insights for sellers and consumers. Under the separate selling mode, if there are many H-consumers (i.e., consumers who give a higher valuation of the product or who have higher price estimations), then it will be effective for sellers to adopt a high price strategy; alternatively, if there is a large consumer population, then the lower price strategy will also attract L-consumers (i.e., consumers who give a lower valuation of the product or who have lower price estimations for the product). However, only one sale price tends to not be optimal because the price is set before the uncertainty is resolved. The results show that, under the interpersonal group buying mode, sellers will simultaneously set the regular price (i.e., the high price) and the group-buying price (i.e., the low price), making them effective in the context of demand uncertainty. Therefore, the interpersonal group buying mode will produce a higher expected profit than that of the separate selling mode, and therefore, sellers will be motivated to use the interpersonal group buying mode. Furthermore, consumers are not motivated to participate in the interpersonal group buying mechanism when both interpersonal group buying price and normal price are low. However, as the normal price increases, the consumer surplus of the interpersonal group buying mechanism will continue to increase, which in turn will encourage consumers to participate in the mechanism, and will expel the low-value consumers. From another aspect, the results reflect that the ultimate goal of the mechanism is not to cater to low-value consumers, but to attract high-value consumers to participate in transactions. Further, in the effective implementation of the mechanism, the optimal interpersonal group buying number and the optimal expected returns are closely related to the ratio of the two types of consumers. Therefore, in the process of implementing the mechanism, the consumers should be consciously subdivided and the private information of different types of consumers should be explored to formulate an effective interpersonal group buying strategy. Finally, the case of "Pinduoduo.com" is introduced, and the validity of related propositions is validated with actual data, and corresponding policy recommendations are provided.

Key words: E-commerce trading, online interpersonal group-buying mechanism, group-buying strategy, consumer segmentation

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