Co-promotion alliance

Abstract

When their products or services reached the mature stage of life cycle, many telecommunications firms started to form alliance partnering with companies in other industries such as movie theaters and fast food restaurants. They offer discounts to their consumers when they buy products or services from their partnering companies. We show that, even in markets where the total demand does not grow, such co-promotion partnering with companies in different industries can benefit allied firms as well as target consumers who buy products or services from the allied firms. The benefits come from discriminating prices between consumers in price sensitive segments and price insensitive segments.