Optimization and coordination of South-to-North Water Diversion supply chain with strategic customer behavior

AbstractThe South-to-North Water Diversion (SNWD) Project is a significant engineering project meant to solve water shortage problems in North China. Faced with market operations management of the water diversion system, this study defined the supply chain system for the SNWD Project, considering the actual project conditions, built a decentralized decision model and a centralized decision model with strategic customer behavior (SCB) using a floating pricing mechanism (FPM), and constructed a coordination mechanism via a revenue-sharing contract. The results suggest the following: (1) owing to water shortage supplements and the excess water sale policy provided by the FPM, the optimal ordering quantity of water resources is less than that without the FPM, and the optimal profits of the whole supply chain, supplier, and external distributor are higher than they would be without the FPM; (2) wholesale pricing and supplementary wholesale pricing with SCB are higher than those without SCB, and the optimal profits of the whole supply chain, supplier, and external distributor are higher than they would be without SCB; and (3) considering SCB and introducing the FPM help increase the optimal profits of the whole supply chain, supplier, and external distributor, and improve the efficiency of water resources usage

Optimal pricing strategy:How to sell to strategic consumers?

Technological advances are preparing consumers to plan their purchases strategically. Selling to strategic consumers at a fixed price forgoes the profit from salvaging inventory, whereas high-low pricing, as a ubiquitous pricing strategy, is costly due to the offered markdown discount. This research explores the overall impact of consumer's strategic buying behaviour on a pricing strategy, and identifies conditions where fixed pricing, strategic high pricing, or high-low pricing is the best approach by analytically comparing the profits of the three pricing strategies. Our results show that high-low pricing is appropriate only if the offered markdown discount is relatively small. If strategic consumers have a small population and the needed markdown discount is relatively large, retailers can ignore strategic buying behaviour and sell products at a fixed price. Our results emphasize that the markdown discount for clearance sales and the market structure of heterogeneous consumers play vital roles in determining the optimal pricing strategy

Intertemporal price discrimination with two products

We study the two‐product monopoly profit maximization problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly ordered, then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations, we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the established no‐discrimination‐across‐time result does not extend to two‐product sellers under standard taste distributions

Designing Optimal Preannounced Markdowns in the Presence of Rational Customers with Multiunit Demands

We analyze the optimal design of a markdown pricing mechanism with preannounced prices. In the presence of limited supply, buyers who choose to purchase at a lower price may face a scarcity in supply. Our focus is on the structure of the optimal markdown mechanisms in the presence of rational or strategic buyers who demand multiple units. We first examine a complete information setting where the set of customer valuations is known but the seller does not know the valuation of each individual customer (i.e., cannot exercise perfect price discrimination). We then generalize our analysis to an incomplete valuation information setting where customer valuations are drawn from known distributions. For both settings, we compare the seller's profit resulting from the optimal markdown mechanism and the optimal single price. We provide a number of managerial insights into designing profitable markdown mechanisms.pricing, markdown, strategic bidding, price discrimination

Dynamic Pricing in The Presence of Strategic Consumer with Product and Intertemporal Substitution

This study develops a dynamic pricing model with a quality substitutable product, taking into account strategic and myopic consumers. In each of the two periods, the firm can choose between offering a high quality product, a low quality product or both and the corresponding price for the product. Strategic consumers compare current utility with future utility in order to decide the time of purchase and the quality of the product in an attempt to maximize their utilities. Myopic consumers consider only current utility in purchasing of the products. We generate scenarios, prove whether a scenario is feasible and which scenario produces the best profit for the firm. Our result suggests that the firm obtains the best profit when it provides only high quality products in each of the two periods. In other words, the firm does not have to offer quality substitution as intertemporal substitution suffices to maximize the expected profit

The use of product scarcity in marketing

Purpose: as a frequently observed business phenomenon, the use of product scarcity to improve a product’s market performance has received increasing attention from both academics and practitioners. The resulting literature has covered a wide variety of issues based on various theories, using different research methods, in a diverse range of settings. However, this diversity also makes it difficult to grasp the core themes and findings, and to see the outstanding knowledge gaps. This paper reviews previous studies on the use of product scarcity in marketing, and identifies new directions for future research. Design/methodology/approach: a systematic review was conducted to identify and analyse 66 research papers published in business and management journals between 1970 and 2017. Findings: we examined the underlying theories of scarcity-based marketing, and developed a conceptual framework that describes the key factors of product scarcity and how they influence both consumers and the market. We also highlighted some key achievements in modelling the processes involved in using product scarcity in marketing. Originality/value: our analysis of the identified papers suggests that there are substantial gaps in our knowledge of this field, which opens up new paths for future research. For future research, we identified three directions aimed at: addressing the practical needs of firms in understanding product scarcity; guiding the implementation of scarcity-based strategies; and measuring, monitoring, and predicting the level of product scarcity and its impacts during implementation

Establishing psychological relationship between customers and retailers: a study of the small to medium scale clothing retail industry

Purpose The purpose of this qualitative study is to investigate how young female customers establish psychological relationships with small- to medium-scale retail stores over time forming purchase intentions, actual purchase patterns and repurchase behaviour. Role of various customer typologies was also considered. Design/methodology/approach A case study approach was implemented to collect and analyse data, where data was collected from 20 young female customers and ten clothing retailers using purposive sampling via semi-structured interviews. Interviews with customers were conducted in a place of their choice such as in a coffee shop, whereas data from retailers were collected in the retail stores. Both online and offline retail patronage was considered to incorporate the growing tendency towards online shopping. Results were analysed using thematic analysis. Findings This study managed to reveal a number of interesting findings on how female customers form and develop psychological relationships with clothing retailers over time that ultimately builds customer loyalty. Customer behaviour in pre-purchase, purchase and re-purchase stages can significantly vary according to their individual perceptions, whereas they have a few favourite clothing brands that they frequently shop for. Preference for online shopping was found to be minimal, most of them enjoying in store experiences. Further, word of mouth and unique designs emerged as key contributors in establishing retail brand loyalty. Practical implications This paper provides better insights for clothing retailers and industry practitioners in understanding how customer perceptions affect clothing purchase decisions. Originality/value This paper contributes to the retail literature by emphasizing on various elements that should be amalgamated through proper synthesis to serve customers. The research is unique as it analyses customer behaviour using a recreational activity model as opposed to marketing models to demonstrate how customers develop relationships with retail brands overtime

The Methods for measuring Price Reduction on sales Business

Cijena je jedini element marketinškog miksa koji generira novu vrijednost za poslovne subjekte. Cijena je novčani ekvivalent vrijednosti proizvoda i usluga (Kotler, 2006). Cjenovna konkurentnost se može promatrati kao važan izvor konkurentske prednosti, a za nju se opredjeljuju poduzeća koja primjenjuju strategiju troškovnog vodstva (Mikić, 2009). Opredjeljenje za troškovno vodstvo i cjenovnu konkurentnost obično imaju poduzeća s visokim stupnjem standarizacije proizvodnog i uslužnog programa. Potencijalni problem vezan uz primjenu cjenovne konkurentnosti je mogućnost imitacije od strane konkurenata i potencijalan ulazak u cjenovni rat. Sniženje cijene utječe na promjene u ukupnom obujmu prodaje te na promjene u ukupnoj vrijednosti prodaje, a time i na profitabilnost poslovanja poduzeća. Stoga se metode mjerenja utjecaja sniženja cijena provode s ciljem izračuna vrijednosnog učinka, učinka cijene na prodajne količine i učinka sniženja cijene na profit u prodajnom poslovanju. Metrike marketinga koje je poželjno koristiti s ciljem mjerenja utjecaja sniženja cijena na prodajno poslovanje su: cjenovna premija, rezervirana cijena, postotak valjane vrijednosti, optimalna cijena i cijena za ostvarenje ciljnog povrata (Farris i sur., 2014, Grbac i Meler, 2010). Metrike u prodajnom poslovanju koriste se kako bi se ocijenila razina sukladnosti između realiziranih i postavljenih prodajnih ciljeva. Utjecaj sniženja cijena na prodajno poslovanje moguće je mjeriti putem realiziranih prodajnih kvota po pojedinim kupcima, tržištima i prodajnim kanalima te putem odnosa između dobiti i troškova po opsluživanju pojedinih kupaca, tržišta i po pojedinim kanalima prodaje.Price is the only element of marketing mix that generates new value for business. Price is the cash equivalent of the value of products and services (Kotler, 2006). Price competitiveness can be seen as an important source of competitive advantage, and companies are opting for cost management strategy (Mikić 2009). Commitment to cost management and price competitiveness usually have companies with a high degree of standardization of manufacturing and service programs. A potential problem with the application of price competitiveness is the possibility of imitation by competitors and potential beginning of the price war. Reducing prices affect changes in total value of sales, and thus on profitability of business operations. Therefore, the methods of measuring the effect of the price reduction are carried out in the order to calculate the value effect, the effect of the price on the sales volume and the effect of the price reduction on profit. The marketing metrics that are desirable to measure the impact of the price reduction on sales are the price premium, reserved price, percentage of the valued value, optimal price and the price for the achieving the target return (Ferris et al 2014, Grbac and Meler, 2010). Sales performance metrics are used to assess the level of compliance between realized and set sales targets. The impact of price reduction on sales business can be measured through realized sales quotas per individual customers, markets and sales channels, and through the profits and costs per serving ratios regarding individual customers, markets and sales channels

Pricing of Conditional Upgrades in the Presence of Strategic Consumers

In this paper, we study a conditional upgrade strategy that has recently become common in the travel industry. After a consumer makes a reservation for a product (e.g., a hotel room), she is asked whether she would like to upgrade to a higher-quality (more expensive) one at a discounted price. The upgrade, however, is not fulfilled immediately. The firm fulfills upgrades at check-in if higher-quality products are still available, and the upgrade fee is only charged to the consumer if she gets upgraded. Consumers decide which product type to book and whether to accept an upgrade offer based on the anticipated upgrade probability. We model the consumers' decisions using a Poisson-arrival game framework with incomplete information and prove the existence of Bayesian Nash equilibrium. To further study the firm's optimal upgrade pricing strategy,we also analyze a fluid model which is the asymptotic version of the stochastic model. Our numerical studies validate that our theoretical results derived from the fluid model carry through to the stochastic model. Our analysis identifies multiple benefits of conditional upgrades. First, the firm is able to capture more demand by offering conditional upgrades, Second, conditional upgrades enable the firm to improve its market segmentation by inducing more consumers to purchase higher-quality products. Third, conditional upgrades give the firm more flexibility in better matching fixed capacities to stochastic demands. For a firm that has the ability to optimize product prices, conditional upgrades can generate higher revenues than dynamic pricing.http://deepblue.lib.umich.edu/bitstream/2027.42/117357/1/1300_Duenyas.pd