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Markdown Pricing With Quality Perception
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Book Synopsis Markdown Pricing with Quality Perception by : Rim Hariss
Download or read book Markdown Pricing with Quality Perception written by Rim Hariss and published by . This book was released on 2020 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Problem Definition: Consumers often perceive higher-priced products to have higher quality. Less is known on how quality perception is affected by price markdowns. In addition, it is an open question whether and how consumers' ex-ante expectation on a future markdown affects their quality perception as well as purchase decisions. We answer these questions in a markdown setting under a fixed inventory.Academic/Practical Relevance: This paper adds to the growing literature that incorporates consumers' behavioral regularities in revenue management by studying the new dimension of quality perception and generates new insights absent in the current literature. Our results offer insights on how retailers should adapt their markdown strategy in the presence of price-based quality perception.Methodology: We develop a consumer model that incorporates quality perception and emotional loss when the expected markdown is too optimistic as compared to the actual markdown. We embed this model into the retailer's markdown optimization and examine the impact of consumers' behavioral factors on the retailer's optimal strategy. Finally, we design and conduct a consumer study to calibrate our model and validate the functional relationships among key factors. Results: Consumers' quality perception increases with the products full price while it decreases with the (expected) markdown. We show that the retailer's optimal markdown is nonmonotone in these quality perception parameters. The nonmonotonicity is driven by the nontrivial tradeoff of trying to maintain a higher perceived quality by the consumers while controlling potential loss emotion that could arise if consumers observe a smaller-than-expected markdown, particularly when total market demand is not very large. Furthermore, we find that it is beneficial for the retailer to pre-announce and commit to a markdown strategy to prevent a mismatch between consumers' expectation and the actual markdown. This approach benefits the retailer by eliminating the negative effect on sales of the consumers' loss emotion due to an optimistic expectation.Managerial Implications: Ignoring these behavioral factors can substantially hurt the retailer's payoff. When inventory is tight, it is critical to correctly capture consumers quality perception (38% average loss in payoff if ignored). When instead inventory is sufficient, the retailer should be mindful of the potential emotional loss that its markdown could create among its consumers.
Book Synopsis Pricing with Quality Perception by : Wichinpong Park Sinchaisri
Download or read book Pricing with Quality Perception written by Wichinpong Park Sinchaisri and published by . This book was released on 2016 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quality is one of the most important factors behind a decision to purchase any product. Consumers have long assumed that price and quality are highly correlated, and that as the price of a product increases, its quality also increases ("you get what you pay for"). Several researchers have studied how consumers use price to infer quality, but very few have investigated the impact of pricing strategies, particularly price markdowns, on quality perception and how a retailer should react to such behavior. Our key research questions, viewed through both an empirical and a theoretical lens, concern how markdowns with different discount levels may induce different consumer behaviors and how the firm should incorporate them when optimizing its markdown policy. We empirically elicit the relationship between a consumer's quality perception and available price information, and refine a consumer demand model to capture these insights, together with other motives-reference dependence, loss aversion, patience, and optimism. For the retailer, we characterize the structure of the market segmentation and analyze its optimal markdown strategy when consumers are sensitive to quality. We present conditions in which it is optimal for the firm to apply a markdown to its products. When consumers are more sensitive to the product's original price than to the discount, or are impatient to wait for the future discounts, the retailer can earn the maximum revenue when applying a markdown strategy. Furthermore, we advocate that the firm should pre-announce the information about future markdowns in order to avoid the negative effect of the consumers' inaccurate estimates.
Book Synopsis Data-driven Optimization with Behavioral Considerations by : Rim Hariss
Download or read book Data-driven Optimization with Behavioral Considerations written by Rim Hariss and published by . This book was released on 2019 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis aims to introduce descriptive and predictive models that guide more informed pricing strategies in practice, drawing from interdisciplinary work of current OM, behavioral theories and recent machine learning advances. In chapter 2, we integrate a consumer purchase experiment and an analytical model to investigate how consumers’ price-based quality perception, expected markdown, and a product’s availability information influence a retailer’s markdown pricing strategy. We subsequently develop a consumer model that incorporates consumers’ price-based quality perception observed from the experimental data and consumers’ potential loss aversion. We embed this consumer model into the retailer’s markdown optimization and examine the impact of these behavioral factors on the retailer’s optimal strategy. In chapter 3, we study a retailer’s optimal promotion strategy when demand is affected by different classes of customers’ status in the rewards program and their heterogeneous redemption behavior. We formulate the retailer’s problem as a dynamic program and prove a unique optimal threshold discounting policy. We also propose an approximation algorithm of the optimal price as a convex combination of the optimal prices for each class separately. Using data from a fast food chain, we assess the performance of the algorithm and the optimal pricing compared to current practice. In chapter 4, we are concerned with accurately estimating price sensitivity for listed tickets in the secondary market. In the presence of endogeneity, binary outcomes and non-linear interactions between ticket features, we introduce a novel loss function which can be solved using several off-the-shelf machine learning methods. On a wide range of synthetic data sets, we show that our approach beats state-of-the-art machine learning and causal inference approaches for estimating treatment effects in the classification setting. In chapter 5, we consider an optimization problem with a random forest objective function and general polyhedral constraints. We formulate this problem using Mixed Integer Optimization techniques and show it can be solved to optimality efficiently using Pareto-optimal Benders cuts. We prove analytical guarantees for a random forest approximation that consists of only a subset of trees. We also propose heuristics inspired by cross-validation and assess their performance on two real-world case
Book Synopsis Pricing Made Easy by : Mitesh Maheshwari
Download or read book Pricing Made Easy written by Mitesh Maheshwari and published by Mindpop. This book was released on 2019-11-16 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing Made Easy helps you understand What is pricing, Current market pricing scenario, Various pricing strategy, Pricing problem & mistakes in today’s business and Pricing objective. This book teaches you how to Price your product focusing on two main strategies Markup & Markdown with real-time examples and different ways to calculate them. Markdown strategy helps you price your product during a seasonal sale or create a plan before going to the next selling season to keep all products moving through the store as quickly as possible. This strategy is most effective for stores whose customers visit frequently because the store needs to maintain an image of always having exciting new products available. One more reason to use this strategy is Poor performance of the product or reduction of the price because of a product’s inability to sell at its original price. Markup strategy helps you save lots of time by pricing products quickly. If you do not keep up with the prices of your competitors though, you can end up losing lots of money. This will happen if your prices are over or underpriced. In one case you will lose your customers and in the other, you will have lower profit margins. It also helps the vendor to easily calculate profit and Fair price of the product can be easily found. This strategy is mainly used by manufacturers and retailers to calculate their selling price. This book helps you choose prices that maximize profits and shareholder value while considering consumer and market demand.
Book Synopsis Consumer Price Perception by : Mai Anttila
Download or read book Consumer Price Perception written by Mai Anttila and published by . This book was released on 1977 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Defining and Relating Price, Perceived Quality, and Perceived Value by : Valarie A. Zeithaml
Download or read book Defining and Relating Price, Perceived Quality, and Perceived Value written by Valarie A. Zeithaml and published by . This book was released on 1987 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Markdown Or Everyday-Low-Price? The Role of Behavioral Motives by : Özalp Özer
Download or read book Markdown Or Everyday-Low-Price? The Role of Behavioral Motives written by Özalp Özer and published by . This book was released on 2017 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a seller's optimal pricing and inventory strategies when behavioral (non-pecuniary) 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 at the beginning of a two-period selling season. 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 (non-pecuniary) 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 which 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 which may intensify consumers' misperception of availability, such as intentionally disclosing low inventory levels, can have a far-reaching impact on improving the seller's profit.
Book Synopsis Psychological Foundations of Marketing by : Allan J. Kimmel
Download or read book Psychological Foundations of Marketing written by Allan J. Kimmel and published by Routledge. This book was released on 2012 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: Choice Outstanding Academic Title for 2013 Are we influenced by ads even when we fast-forward them? Do brands extend our personalities? Why do we spend more when we pay with a credit card? Psychological Foundations of Marketing considers the impact of psychology on marketing practice and research, and highlights the applied aspects of psychological research in the marketplace. This book presents an introduction to both areas, and provides a survey of the various contributions that psychology has made to the field of marketing. Each chapter considers a key topic within psychology, outlines the main theories, and presents various practical applications of the research. Topics covered include: Motivation: The human needs at the root of many consumer behaviors and marketing decisions. Perception: The nature of perceptual selection, attention and organization and how these perceptual processes relate to the evolving marketing landscape. Decision making: How and under what circumstances it is possible to predict consumer choices, attitudes and persuasion? Personality and lifestyle: How insight into consumer personality can be used to formulate marketing plans. Social behavior: The powerful role of social influence on consumption. This book will be of great interest to a diverse audience of academics, students and professionals, and will be essential reading for courses in marketing, psychology, consumer behavior and advertising.
Book Synopsis Optimal Markdown Pricing by : Rui Yin
Download or read book Optimal Markdown Pricing written by Rui Yin and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consider a retailer announces both the regular price and the post-season clearance price at the beginning of the selling season. Throughout the season, customers arrive in accord with a Poisson process. In this paper we analyze the impact of two types of customer purchasing behavior and two common in-store display formats on the retailer's optimal expected profit and optimal order quantity. We consider the case when all customers are either myopic (purchase immediately upon arrival) or strategic (either purchase at the regular price upon arrival or attempt to purchase at the clearance price after the season ends). In addition, we consider the case when the retailer would display either all available units or one unit at a time on the sales floor. When all customers have identical valuation, we show that, in equilibrium, each strategic customer's purchasing decision is based on a threshold policy that depends on the inventory level at the time of arrival. We prove analytically that the retailer would obtain a higher expected profit and would order more when the customers are myopic. Also, we show analytically that the retailer would earn a higher expected profit and would order more under the display one unit format when the customers are strategic. We illustrate numerically the penalty when the retailer mistakenly assumes that the strategic customers are myopic. We extend our analysis to the case in which customers belong to multiple classes, each of which has a class-specific valuation, and also to the case in which the post-season clearance price depends on the actual end-of-season inventory level.
Book Synopsis The Role of Price Cues in Product Quality Perception by : Prem C. Purwar
Download or read book The Role of Price Cues in Product Quality Perception written by Prem C. Purwar and published by . This book was released on 1981 with total page 808 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Image and the price-perceived quality relationship by : Michael Charles Kleiman
Download or read book Image and the price-perceived quality relationship written by Michael Charles Kleiman and published by . This book was released on 1985 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Consumer price perception by : Mai Anttila
Download or read book Consumer price perception written by Mai Anttila and published by . This book was released on 1977 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Pricing Model Revolution by : Danilo Zatta
Download or read book The Pricing Model Revolution written by Danilo Zatta and published by John Wiley & Sons. This book was released on 2022-05-24 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: An incisive and accessible blueprint to pricing your company’s products and services In The Pricing Model Revolution: How Pricing Will Change the Way We Sell and Buy On and Offline, world renowned pricing expert Danilo Zatta delivers an essential and engaging blueprint to building an enduring competitive advantage with insightful pricing models. In the book, you’ll learn to identify the best monetization approaches for your products and how to execute the one that makes the most sense for your business. From freemium to subscription, pay-per-use, and even neuropricing, the author discusses every available option and shows you how to choose. Although it's rigorous and evidence backed, The Pricing Model Revolution avoids an overly academic perspective in favour of providing you with concrete, practical guidance you can apply immediately to start generating more revenue. You’ll learn things like: How to make smart and innovative pricing a core component of your next product offering How to distinguish between every new, future-oriented monetization approach Which factors to consider when you’re choosing on a new pricing model for your most popular products An essential read for C-level executives, managers, entrepreneurs, and sales team leaders, The Pricing Model Revolution belongs on the bookshelves of every business leader seeking to learn more about one of the foundational topics driving top-line revenue and bottom-line profitability today.
Book Synopsis The Salience of Price in the Perception and Evaluation of Product Quality by : Vithala Rajeswara Rao
Download or read book The Salience of Price in the Perception and Evaluation of Product Quality written by Vithala Rajeswara Rao and published by . This book was released on 1970 with total page 684 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Salience of Price in the Perception and Evaluation of Product Quality by : Vithala R. Rao
Download or read book The Salience of Price in the Perception and Evaluation of Product Quality written by Vithala R. Rao and published by . This book was released on 1970 with total page 684 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effects of Odd-even Retail Pricing on Value Determination, Product Perception, and Buying Propensities by : David Matthew Georgoff
Download or read book The Effects of Odd-even Retail Pricing on Value Determination, Product Perception, and Buying Propensities written by David Matthew Georgoff and published by . This book was released on 1970 with total page 578 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Price and the Perception of Quality by : Joseph H. Thaman
Download or read book Price and the Perception of Quality written by Joseph H. Thaman and published by . This book was released on 1988 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
