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Remanufacturing as a Marketing Strategy

College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308
Marketing, INSEAD, 77300 Fontainebleau, France
Technology Management Area, INSEAD, 77300 Fontainebleau, France
atalay.atasu{at}mgt.gatech.edu
miklos.sarvary{at}insead.edu
luk.van-wassenhove{at}insead.edu

The profitability of remanufacturing systems for different cost, technology, and logistics structures has been extensively investigated in the literature. We provide an alternative and somewhat complementary approach that considers demand-related issues, such as the existence of green segments, original equipment manufacturer competition, and product life-cycle effects. The profitability of a remanufacturing system strongly depends on these issues as well as on their interactions. For a monopolist, we show that there exist thresholds on the remanufacturing cost savings, the green segment size, market growth rate, and consumer valuations for the remanufactured products, above which remanufacturing is profitable. More important, we show that under competition remanufacturing can become an effective marketing strategy, which allows the manufacturer to defend its market share via price discrimination.

Key Words: remanufacturing; product returns; price discrimination; competition
History: Received: June 27, 2005;

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