Markdown or Everyday Low Price? The Role of Behavioral Motives

We study a seller’s optimal pricing and inventory strategies when behavioral (nonpecuniary) motives affect consumers’ purchase decisions. In particular, the seller chooses between two pricing strategies, markdown or everyday low price, and determines the optimal prices and inventory level. Two salient behavioral motives that impact consumers’ purchase decisions and the seller’s optimal strategies are anticipated regret and misperception of product availability. Regret arises when a consumer initially chooses to wait but encounters stockout later, or when the consumer buys the product at the high price but realizes that the product is still available at the markdown price. In addition, consumers often perceive the product’s future availability to be different than its actual availability. We determine and quantify that both regret and availability misperception have significant operational and profit implications for the seller. For example, ignoring these behavioral factors can result in up to 10% profit losses. We contrast the roles of consumers’ strategic (pecuniary) motives with their behavioral (nonpecuniary) motives in affecting purchase, pricing, and inventory decisions. The presence of the behavioral motives reinstates the profitability of markdown over everyday low price, in sharp contrast to prior studies of only strategic motives that suggest the contrary. We characterize how and why strategic versus behavioral motives affect decisions in distinctive manners. In doing so, this paper also introduces and determines the behavioral benefits of pricing in leveraging consumers’ behavioral regularities. We advocate that tactics that may intensify consumers’ misperception of availability, such as disclosing low inventory levels, can have a far-reaching impact on improving the seller’s profit

Why markdown as a pricing modality?

Markdown as a pricing modality is ubiquitous in retail whereas everyday low price (EDLP) remains relatively rare (despite its several advantages, such as simplicity). This paper explores whether and why retailers can use either of these pricing modalities as an effective defense against a competitor entering the market with the alternative pricing modality. Various studies have shown that consumers are strategic and heterogeneous in their valuation of a product. Consumers are also shown to be regret-prone, and anticipation of regret affects their purchase decisions. Consumers experience availability regret when they are unable to purchase products due to stockouts and high-price regret when they miss an opportunity to purchase products at low prices. Considering such factors, consumers decide whether, when, and from which retailer to purchase the product. In such a market environment, we find that the possible entry of a competitor should deter retailers from using the EDLP pricing modality but not markdown. We also identify a new reason for the markdown retailer to ration stock (in addition to the reason for discouraging consumers to wait for the markdown). In particular, we show that the markdown retailer can use inventory rationing to preclude a cutthroat competition and bankruptcy after the entry of an EDLP retailer. We also quantify how consumer regret affects both retailers' decisions and resulting profits. In particular, in a competitive market, the EDLP retailer cannot simply disregard consumers' availability and high-price regret (even when it stocks ample inventory and does not discount prices). We show that high-price regret and availability regret have complementary effects on the markdown retailer's rationing strategy and the EDLP retailer's price decision. Finally, using a proprietary price data set from a large department store, we show that ignoring regret factors causes the markdown retailer to leave up to 20% of its profits on the table. In addition, in a competitive market, the markdown retailer rations too aggressively when regret is ignored and, as a result, leaves some of the forgone profit to its competitor-the EDLP retailer. The retail industry is often characterized by its slim profit margins. In such an environment, the aforementioned results also suggest that retailers should seriously consider investing in developing the capacity to estimate and quantify the role of regret in consumers' purchase decisions

Implementasi penetapan harga pada toko ritel dalam upaya meningkatkan volume penjualan: Studi kasus pada Toko Ritel Istana Belanja Bululawang

INDONESIA: Dalam sebuah persaingan saat ini sebagai individu mulai membiasakan diri untuk membuka diri dan menerima adanya perubahan yang diakibatkan oleh perkembangan yang sangat berkembang dengan pesat tersebut, tidak terkecuali pada dunia kerja. Harga berfungsi sebagai penentu utama pilihan pembeli, meskipun faktor non-harga telah menjadi semakin penting dalam perilaku pembeli selama bertahun tahun, harga tetap menjadi salah satu faktor terpenting yang menentukan pangsa pasar dan profitabilitas perusahaan. Harga ditetapkan secara independen dari bauran pemasaran lainnya, bukan sebagai elemen penting dari strategi penentuan posisi pasar, dan harga yang tidak bervariasi Itu tergantung pada produk. Penetapan pada harga dan juga persaingan dalam harga adalah permasalahan yang dapat mudah ditemui yang dihadapkan oleh banyak pemimpin dalam bidang pemasaran. Penelitian ini bertujuan untuk mengungkapkan mengenai implementasi penetapan harga pada toko ritel Istana Belanja Bululawang dalam upaya meningkatkan volume penjualan. Penelitian ini menggunakan metode kualitatif dengan pendekatan studi kasus. Data dari penelitian ini diperoleh melalui wawancara dan dokumentasi, dimana peneliti langsung terjun ke lapangan untuk mengamati kondisi yang terjadi dan melakukan wawancara kepada informan yang dirasa dibutuhkan dalam mendukung penelitian ini. Teknik analisis data yang digunakan pada penelitian ini menggunakan Teknik analisis data Miles & Huberman, Hasil dari penelitian yang dilakukan menunjukkan bahwa toko ritel Istana Belanja Bululawang menggunakan strategi penetapan harga Everyday Low Price. Strategi penetapan harga yang dilakukan memiliki beberapa manfaat bagi peritel yang menggunakan. Namun dari beberapa manfaat yang ditemukan peneliti juga menemukan beberapa kendala yang terjadi pada saat penerapan strategi penetapan harga Everyday Low Price ini dalam upaya meningkatkan volume penjualan pada toko ritel Istana Belanja Bululawang. ENGLISH: In a competition moment This individual begins to get used to opening up and accepting changes caused by developments that are developing rapidly, including the world of work. Price serves as a major determinant of buyer choice, although non-price factors have become increasingly important in buyer behaviour over the years, price remains one of the most important factors determining a company's market share and profitability. Prices are set independently of the rest of the marketing mix, not as an important element of market positioning strategy, and prices do not vary It depends on the product. Pricing and price competition are easily encountered problems faced by many leaders in the marketing field. This study aims to reveal the implementation of price fixing at the Istana Belanja Bululawang in an effort to increase sales volume. This study uses a qualitative method with a case study approach. Data from study This was obtained through interviews and documentation, where the researchers went directly to the field to observe the conditions that occurred and do interviews to informants who felt needed to support this research. The data analysis technique used in this study uses the technique analysis data Miles & Huberman, Result of study which is conducted show that the Istana Belanja Bululawang retail store uses a pricing strategy Everyday Low Price. Strategy price fixing has a number of benefits for retailers who use. However, from the several benefits that were found, the researcher also found several obstacles that occurred when implementing the pricing strategy Everyday Low Price This is in an effort to increase sales volume at the Istana Belanja Bululawang retail store.   ARABIC: في مسابقة اليوم ، كأفراد ، بدأوا في التعود على الانفتاح وقبول التغييرات التي تسببها التطورات التي تتطور بسرعة ، بما في ذلك عالم العمل. يعمل السعر كمحدد رئيسي لاختيار المشتري ، على الرغم من أن العوامل غير السعرية أصبحت ذات أهمية متزايدة في سلوك المشتري على مر السنين ، لا يزال السعر أحد أهم العوامل التي تحدد حصة الشركة في السوق وربحيتها. يتم تحديد الأسعار بشكل مستقل عن باقي المزيج التسويقي ، وليس كعنصر مهم في إستراتيجية تحديد المواقع في السوق ، والأسعار لا تختلف حسب المنتج. تواجه منافسة الأسعار والأسعار المشاكل التي يواجهها العديد من القادة في مجال التسويق بسهولة. تهدف هذه الدراسة إلى الكشف عن تطبيق التسعير في متاجر البيع بالتجزئة في محاولة لزيادة حجم المبيعات. تستخدم هذه الدراسة طريقة نوعية مع نهج دراسة الحالة. تم الحصول على البيانات من هذه الدراسة من خلال المقابلات والتوثيق ، حيث ذهب الباحثون مباشرة إلى الميدان لمراقبة الظروف التي حدثت وأجروا مقابلات مع المخبرين الذين اعتبروا ضروريين لدعم هذا البحث. تستخدم تقنية تحليل البيانات المستخدمة في هذه الدراسة تقنية تحليل البيانات Miles & Huberman. تظهر نتائج البحث الذي تم إجراؤه أن متاجر البيع بالتجزئة تستخدم إستراتيجية التسعير اليومي المنخفض السعر. إستراتيجية التسعير التي يتم تنفيذها لها فوائد عديدة لتجار التجزئة الذين يستخدمونها. ومع ذلك ، من بين الفوائد العديدة التي تم العثور عليها ، وجد الباحث أيضًا العديد من العقبات التي حدثت عند تنفيذ إستراتيجية تسعير Everyday Low Price في محاولة لزيادة حجم المبيعات في متاجر البيع بالتجزئة

Families and states: citizenship and demography in the Greco-Roman world

This paper investigates the interrelationship between states and families. At different levels of organization, both play a large role in shaping the context in which individuals live their lives. Yet when it comes to understanding key demographic events in the ancient Mediterranean world – birth, marriage, migration, family structures, and death – they are hardly brought together. In this paper, I argue that Greek and Roman demographic patterns were tightly connected with their own specific political-institutional frameworks that developed over the course of (city-)state formation processes. This interaction was shaped in particular by the emergence of diverging notions of citizenship in the Greek and the Roman world, which went hand in hand with the installment of disparate incentives and disincentives to certain demographic behaviors. Differing citizenship criteria, in other words, invoked different demographic behaviors. A ‘political demography’ perspective, therefore, helps us understand how and why Greek and Roman individuals selected their marriage candidates on different criteria, and sheds light on divergences in their respective emphases on extended family ties.

Locating outsourced and offshored production based on supply chain strategy: Findings from Swedish fashion/trend apparel companies

Bakgrund: En stor utmaning inom klädindustrin är att kombinera produkters korta livscykler med de komplexa försörjningskedjornas långa ledtider. Följaktligen finns det ett antal supply chain-strategier som hanterar utmaningen olika: kostnadseffektiva, responsiva och resultatdrivna som fokuserar på ett större antal aspekter. Dessa olika strategier lokaliserar outsourcad och offshorad produktion olika för att hantera utmaningarna. Utvecklingen i lågkostnadsländer har utvecklat supply chain-strategier och beslutet för lokalisering. Syfte: Följande syfte har formulerats för examensarbetet: ”Analysera vilka faktorer svenska klädföretag finner viktiga när de lokaliserar outsourcad och offshorad produktion i Europa och Asien, samt hur dess företagsstrategi och supply chain-strategi matchar”. Ett antal forskningsfrågor har också uppformats för ytterligare förståelse. - Hur kategoriserar svenska klädföretag sina produkter och används kostnadseffektiva samt responsiva försörjningskedjor för respektive kategori? - Hur påverkar valet av supply chain-strategi de olika faktorerna? - Hur har utvecklingen i lågkostnadsländer påverkat svenska klädföretags lokaliseringsval för outsourcad och offshorad produktion? Metod: Metoden använd för studien är inspirerad av Yins (2004) multipla fallstudie metod. För att kunna svara på syftet och forskningsfrågorna till detta examensarbete har en intervjuguide tagits fram, vilken var underlag för genomförandet av fem mer djupgående analyser av svenska klädföretag. Då det finns ett stort antal företag i den svenska klädbranschen bör därför inte resultatet av de genomförda intervjuerna ses som ett enhetligt resultat för hela branschen, utan bör istället ge en indikation på hur företag inom branschen resonerar kring dessa frågor. De givna svaren från respektive intervju jämfördes först med det utformade teoretiska ramverket, för att sedan följas upp med en avslutande jämförelse företagen emellan för att på så sätt kunna urskilja eventuella mönster. Det utvecklade teoretiska ramverket är primärt baserat på Chopra och Meindls (2004) Network Design Decision Framework. Författarnas ramverk används för att kunna avgöra lokalisering av produktion baserat på: konkurrensstrategi, supply chain-strategi och ett antal faktorer. Detta ramverk kompletterades sedan med supply chain-strategi teori av Fisher (1997) och ytterligare faktorer som forskarna fann intressanta för studien. Slutsatser: Vår undersökning visade att alla fem företag kategoriserar sina produkter. Däremot är det enbart de större företagen, som bedriver egen detaljhandels verksamhet, som har olika supply chain-strategier för dess produktkategorier. De större företagen erhåller hela risken i dess supply chain själva. Dessa företag använder sig av en kostnadseffektiv strategi för dess första orders och en responsiv strategi för dess andra orders. De mindre företagen använder sig istället av en grosshandlarförsäljningsmodell (tillverkning mot order), vilket innebär att de inte själva behöver ta någon risk. Detta medför att de mindre företagen därmed inte behöver samma nivå av matchning dess respektive strategier emellan. Generellt är det samma faktorer som är viktiga för samtliga fem företag gällande val av lokalisering, däremot skiljer sig ledtid och kostnad mellan stora och mindre företag. Slutsatsen är att mindre företag, med dess grosshandlarförsäljningsmodell, inte behöver reducera kostnaden och vara responsiva i samma utsträckning som de större företagen med den egna detaljhandelsmodellen. De gemensamma faktorerna företagen emellan är viktiga oavsett om produktionen är lokaliserad i Europa eller Asien, detta då företagen vill standardisera sin produktion i så stor utsträckning som möjligt och därmed försäkra sig om att samma nivå på kvalitet och passform m.m. uppnås. Alla deltagande företag har erfarit utvecklingen i lågkostnadsländer och har därför börjat se över alternativa lokaliseringar för dess nuvarande produktion.Background: One of the main challenges in the fashion apparel industry is combining the products short lifetimes with the complex supply chains and long lead-times. There are thus several different types of supply chains that compete differently: the physically efficient, the market responsive and the outcome-driven supply chain. These supply chains locate outsourced and offshored production differently to manage the challenges. The development in Asian low cost countries has implied higher wages and manufacturing costs. This development has affected the supply chains and decisions of where to locate production. Purpose: The formulated purpose for this master thesis is: “Analyze factors Swedish fashion apparel companies find important when locating their outsourced and offshored production in Europe and Asia, and its alignment with their competitive strategy and supply chain strategy”. A number of research questions were also formulated to get a more thorough understanding. - How do Swedish fashion apparel companies’ categorize their products, and are efficient or responsive supply chain strategies established for each category? - How does the choice of supply chain strategy affect the factors? - How has the development in LCC affected Swedish fashion apparel companies’ choice of locating production? Method: The methodology of this thesis is inspired by the multiple case study method (Yin, 2004). To answer the purpose and research questions of this thesis an interview guide was designed to conduct in depth interviews with five Swedish fashion apparel companies. As there are a large number of Swedish fashion apparel companies the outcome of the interviews should not be considered as a representative sample. Instead they should provide an indication of how companies reason regarding the questions. The answers from each interview were first compared to the established theoretical framework and then followed by cross-case patterning. The established framework is primarily based on Chopra and Meindl’s (2004) Network Design Decision Framework. The authors’ framework is used for determining location for production based on: competitive strategy, supply chain strategy, and a number of factors. This model was complemented with additional theory regarding supply chain strategies from Fisher (1997) and other factors that the researchers found interesting. Conclusions: Our investigation showed that all five companies categorize their products, however it is only the larger companies with their own retail business who have different supply chain strategies for their categories. The larger companies bear the risk in the supply chain themselves and thus they have a cost-efficient supply chain for first orders and a market responsive supply chain for second orders. The smaller companies use a wholesale model (make-to-order) and thus don’t take any risk, consequently they don’t need the same level of alignment between their strategies. Generally the same factors are important for all five companies when selecting location, however the lead-time and cost factor differ among the smaller and larger companies. The conclusion being that the smaller companies with their wholesale business models don’t need to reduce costs and be responsive compared to the larger companies with their own retail. The same factors are important regardless if production is located in Europe or Asia as the companies want to standardize production and ensure the same level of quality, fit etc. All case companies have experienced the development in LCC and are thus reviewing alternative locations

Essays on Sales Promotion and Consumer Decision Making Process

Sales promotion is a common tool used by retailers. However, even though it is commonly used in marketplace, sometimes it cannot achieve the results as retailers expect. Thus, the specific process of consumer decision making and factors that influence the effect of promotions on consumer behavior need further research. This thesis is composed of a literature review of sales promotions, consumers response to a specific sales promotion (Minimum Purchase Requirement deal), and consumers’ decision-making process when using different symbols to shop. The first chapter presents an integrative review to summarize past empirical or theoretical literature to provide a comprehensive understanding of consumers’ and marketers’ response towards monetary and non-monetary sales promotion. The second chapter examines how the consumer’s regulatory focus influences their shopping behavior when they choose to use Minimum Purchase Requirement deals. The third chapter focuses on the interaction effect between symbol usage and personality traits on consumer’s consideration set in online shopping. The relationship among the three chapters is that the first chapter reviews the existing research about sales promotion, and the second chapter focuses on a specific type of sales promotion and examines the effect of consumers’ goal pursuit strategy (regulatory focus) on purchasing behavior when using the deal. Even though the third chapter focuses on external triggered decision-making cues (symbol usage), psychological factors (personality traits) and decision-making process (consideration set) in shopping rather than sales promotions, it follows the same thread of research in consumer decision making process and factors influencing consumer behavior. The thesis aims to contribute to the literature of sales promotion, regulatory focus, priming effect of symbol usage and consumer decision making and behavior. The findings have important implications for marketing practitioners and retailers

Strategic behavior in markets and teams : essays in experimental economics

In classical economics the baseline assumption when analyzing the strategic behavior and performance of firms and individuals is that decision-makers are completely rational and selfish (focused on maximizing their own payoff). While this assumption is a useful theoretical benchmark, it do not always apply to peoples behavior in reality. Human beings are often only partially rational, which may lead to unsophisticated and inefficient decisions. In the three self-contained chapters of this dissertation, I analyze strategic decisionmaking and the dynamics of markets and teams using laboratory experiments. Chapter 2, which is based on joint work with Stefan Penczynski, investigates how much information sellers are willing to disclose under competition and whether consumers make sophisticated buying decisions in the sense that they can draw the right conclusions from the information that is and is not provided to them. Chapter 3, which is based on joint work with Henrik Orzen, considers only the firm side and analyzes the assumption that due to competition and market dynamics only rational firms that decide optimally in terms of profit maximization survive in the long-run. Chapter 3 tackles the question of the validity of laboratory experiments in our market setting. In Chapter 4 I examine dynamic investment behavior in a teamwork setting where investments have to be accumulated over time to complete a certain project. I seek to analyze whether there is cooperative behavior even if collective interests conflict with individual interests as costs are private and benefits are public

The future of social enterprise café in Malaysia: a study on millennials’ perception and intention

Over the past decade, there have been a growing number of social enterprises in Malaysia, especially in the food and beverage industry. However, social enterprise cafes face various challenges in liquidity and lack of public awareness that hindered their progress. In view of this, millennials are the potential target market for social enterprises due to their rapid growth in population and increasing purchasing power. Millennials have high awareness of social issues and support for socially responsible organisations. Based on a survey collected from 424 millennials in Malaysia, data were analysed using the structural equation modelling. Results indicate that millennials are influenced by perceived price and attitude, followed by social norms, while social enterprise knowledge had a significant but weak influence on their intention. In moving forward, the findings suggest that social enterprise cafes could emphasize more on creating value through their pricing strategy and encourage knowledge sharing and attitude towards social enterprises to strengthen purchase intention towards social enterprise cafes. This study not only sheds light on millennials but also assist social enterprises to sustain their business and have a long-term impact on society and environmental causes