Pricing decision with conspicuous customers: quick responses versus value-added services

Abstract

In order to eliminate the negative effects of customer strategic behavior, retailers often adopt quick response or value-added services. While in a luxury market with conspicuous customers, retailers' pricing decisions of these two strategies become more complicated. This paper studies a supply chain with a retailer serving a mixture of conspicuous and ordinary strategic customers. We develop three models so that the retailer provides i) neither quick response nor value-added services;ii) only quick response; iii) only value-added services. Subsequently, we analyze the impacts of conspicuous customers on quick response and value-added services by pricing and strategy comparisons. The model further extends to the situation including both strategies. The results show that, firstly, when the proportion is less than a threshold, the retailer should adopt a low price strategy, and vice versa. Besides, the quick response could induce the retailer to adopt high price while value-added services inhibit it. Secondly, the customer conspicuous behavior can motivate retailers to provide quick response and inhibit their value-added services. Finally, by observing the retailer's decisions when they can adopt two strategies simultaneously, we find that the existence of quick response can amplify the benefits of value-added services.

Decisions for Blockchain Adoption and Information Sharing in a Low Carbon Supply Chain

“…Hong et al [48] studied how value-added service influences profits and decisions in a closed-loop supply chain. Liu et al [49] studied the impacts of conspicuous customers on quick response and value-added service by pricing and strategy comparisons in a luxury market. Begen et al [50] showed that when cooperative advertising solutions exist, the information sharing of value-added service between the traditional retailer and the manufacturer will result in a win-win situation, and it will also benefit the whole supply chain.…”

A closed‐loop supply chain decision model considering corporate social responsibility and value‐added services

“…The consumers pay more and more attention to CSR, which has been a new competitiveness for the enterprises (Liu et al, 2020). Research on the implementation of CSR by CLSC companies has received considerable attention.…”

“…It is also important for companies to provide value‐added services while undertaking CSR. Value‐added services can increase the value and willingness of customers to purchase (Liu et al, 2020). Kastalli and van Looy (2013) studied that service business scale and profit margin present in nonlinear positive correlation.…”