Differentiated premium membership mechanism in platform competition

Abstract

The rapid rise of premium memberships on e-commerce platforms has made it a core strategy for platform competition, attracting widespread attention from the industry and academia. This paper studies two kinds of differentiated membership mechanisms, i.e. the General Pattern (GP) available to all consumers and the Top-tier Pattern (TP) offered only to high-value consumers. We have a detailed description of the consumer's consumption behaviour in line with the real platform competition scenario. We first conducted a separate analysis of the two membership mechanisms and found that the actual implementation effect of TP and GP membership mechanisms are equivalent when there is no membership competition. Then we focussed on the scenario of differentiated member competition. We discuss the interaction between the two membership mechanisms and do a sensitivity analysis of the optimal decisions. The impact of the membership mechanism competition on the member group segmentation and consumption transfer is depicted well and analysed. At last, we use numerical examples to show the relationship between platform profits and some important exogenous variables under differentiated membership competition, and we also find that the differentiated membership mechanisms competition can let the two platforms achieve a win-win result.

Keywords:

• E-commerce operations
• platform competition
• loyalty program
• premium membership
• differentiated strategy

Acknowledgments

The authors thank the editors and the anonymous review team for their insightful comments and suggestions that immensely helped to improve this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

We conducted this research through a stylised model. No data were generated or used during the study.

Notes

1 https://firstround.com/review/heres-what-a-real-growth-strategy-looks-like-road-tested-by-facebook-and-remind

2 https://www.sohu.com/a/357903927_120424432

3 https://www.sohu.com/a/415008442_120154731

4 www.starbucks.com/rewards/

Additional information

Funding

This research was supported by the National Natural Science Foundation of China (Grant Nos. 71801210, 72071193, 71904041,  71921001), Jiangsu Provincial Double-Innovation Doctor Program,Top-Notch Young Talents Program of China, and the Fundamental Research Funds for the Central Universities..

Notes on contributors

Li Hu

Li Hu is a lecturer of School of International Economics and Trade at Nanjing University of Finance and Economics. He holds a Ph.D. from University of Science and Technology of China. His main research interests are in sustainable operations management, interface between marketing and operations management. His work appears in Transportation Research Part E: Logistics and Transportation Review, Annals of Operations Research, International Journal of Production Economics, etc.

Shaofu Du

Shaofu Du is a professor of School of Management at University of Science and Technology of China. He published more than 30 articles in academic journals including International Journal of Production Research, European Journal of Operational Research, Transportation Research Part E: Logistics and Transportation Review, Annals of Operations Research, International Journal of Production Economics.

Lei Wang

Lei Wang is now Ph.D. student at University of Science and Technology of China. His main research interests are in the field of operations management and sustainable operations management.

Wenzhi Tang

Wenzhi Tang is a lecturer of School of Economics and Management at Hefei University. She holds a Ph.D. from University of Science and Technology of China. Her main research interests are in the field of operations management and green supply chain management.