Customer Acquisition,Competition,and Promotion of Weak Products
This paper develops a theory to investigate the economic mechanism of platforms using weak product promotion for profitability and competitive advantage.The game involves the strategical interaction among four types of players:consumers,general product sellers,weak product sellers,and E-commerce platforms.The result shows that,despite the low recognition and high transaction costs of weak products,so long as they brings positive utility to consumers,platforms have an incentive to promote them by providing free traffic.This incentive is driven by the weak products'contribution to the diversity of the platform's offerings,stimulating consumer demand,driving general product sales,and enhancing overall platform revenue.The higher the value of weak products and the lower the transaction costs for weak product sellers,the stronger this effect,and the greater the platform's motivation to promote them.However,the paper also finds that the excessive promotion of weak products by monopolistic platforms may have negative effects.As the promotion of weak products intensifies,the platform may also increase fees for general product sellers,leading to higher prices and potentially harming consumer welfare.As a response to price increases,consumers may reduce their purchases,which in turn could negatively impact weak product sellers.Thus,monopolistic platforms may over-promote weak products.The study further reveals that platform competition can effectively mitigate the negative effects of over-promotion by monopolistic platforms and enhance the promotion of weak products.The competition of a rival platform can boost the platform to intensively promote of weak products without necessarily increasing fees for general products In this scenario,both general and weak product sellers can benefit,achieving a win-win situation for multiple stakeholders.This paper makes three contributions:Firstly,it provides a theoretical framework to analyze the traffic attraction strategy,elucidating the conditions under which platforms can achieve profitability through the promotion of weak products Secondly,and introducing compatible products,this paper emphasizes the traffic attraction role of weak products and delves into the positive impact of this strategy on enhancing platform competitiveness,thereby broadening the research perspective on platform traffic attraction strategies.Thirdly,our findings conveys important policy implication:while encouraging E-commerce platforms to promote weak products like agricultural products to foster market diversity and support the development of weak industries,attention should also be paid to the unintended reactions of platforms towards other players in the E-commerce ecosystem.
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