Pricing Promotional Products Under Upselling

Aydın, Göker; Ziya, Serhan

doi:10.1287/msom.1070.0187

Cited by 61 publications

(38 citation statements)

References 23 publications

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“…The proof of (3)(i) is similar to (2), and follows by utilizing a fixed prices argument. The proof of (3) (ii) is also similar but one needs to use the result that R S ≤ hr R SP ⇒ R S ≤ st R SP ⇐⇒ P {R S > p S } ≤ P {R SP > p S }.…”

Section: Appendix C: Monotonicity Results On the Optimal Prices Under Ltmentioning

confidence: 99%

“…A related recent article is by Aydin and Ziya [2] who consider an "upselling" strategy where upon buying a "regular" product, the customer is offered a "promotional" product at a possible discount. They consider a discrete-time dynamic pricing setting and focus on determining the optimal price and potential discount of the promotional product, while assuming that the price of the regular product and the inventory levels of both products at the beginning of the selling season are exogenously set.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They consider a discrete-time dynamic pricing setting and focus on determining the optimal price and potential discount of the promotional product, while assuming that the price of the regular product and the inventory levels of both products at the beginning of the selling season are exogenously set. Our work differs from Aydin and Ziya [2] in that we focus on jointly determining the optimal (static) pricing and inventory policies for our primary and secondary products and on identifying the market conditions that favor our locational tying strategy over the conventional independent components strategy. Another difference is that we model the effect of the display location of the secondary product on demand, while Aydin and Ziya do not consider display locations.…”

Section: Literature Reviewmentioning

confidence: 99%

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Locational tying of complementary retail items

Maddah

Bish

2009

Naval Research Logistics

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Abstract:We study a selling practice that we refer to as locational tying (LT), which seems to be gaining wide popularity among retailers. Under this strategy, a retailer "locationally ties" two complementary items that we denote by "primary" and "secondary." The retailer sells the primary item in an appropriate "department" of his or her store. To stimulate demand, the secondary item is offered in the primary item's department, where it is displayed in very close proximity to the primary item. We consider two variations of LT: In the multilocation tying strategy (LT-M), the secondary item is offered in its appropriate department in addition to the primary item's department, whereas in the single-location tying strategy (LT-S), it is offered only in the primary item's location. We compare these LT strategies to the traditional independent components (IC) strategy, in which the two items are sold independently (each in its own department), but the pricing/inventory decisions can be centralized (IC-C) or decentralized (IC-D). Assuming ample inventory, we compare and provide a ranking of the optimal prices of the four strategies. The main insight from this comparison is that relative to IC-D, LT decreases the price of the primary item and adjusts the price of the secondary item up or down depending on its popularity in the primary item's department. We also perform a comparative statics analysis on the effect of demand and cost parameters on the optimal prices of various strategies, and identify the conditions that favor one strategy over others in terms of profitability. Then we study inventory decisions in LT under exogenous pricing by developing a model that accounts for the effect of the primary item's stock-outs on the secondary item's demand. We find that, relative to IC-D, LT increases the inventory level of the primary item. We also link the profitability of different strategies to the trade-off between the increase in demand volume of the secondary item as a result of LT and the potential increase in inventory costs due to decentralizing the inventory of the secondary item.

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Section: Appendix C: Monotonicity Results On the Optimal Prices Under Ltmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Locational tying of complementary retail items

Maddah

Bish

2009

Naval Research Logistics

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“…For each λ, let N λ 2 be the smallest optimal solution to (7). Then, we make the following assumption:…”

Section: Asymptotic Analysismentioning

confidence: 99%

When Promotions Meet Operations: Cross-Selling and Its Effect on Call Center Performance

Armony

Gurvich

2010

M&SOM

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We study cross-selling operations in call centers. The following question is addressed: How many customer-service representatives are required (staffing) and when should cross-selling opportunities be exercised (control) in a way that will maximize the expected profit of the center while maintaining a pre-specified service level target. We tackle this question by characterizing control and staffing schemes that are asymptotically optimal in the limit, as the system load grows large.Our main finding is that a threshold priority (TP) control, in which cross-selling is exercised only if the number of callers in the system is below a certain threshold, is asymptotically optimal in great generality. The asymptotic optimality of TP reduces the staffing problem to a solution of a simple deterministic problem, in one regime, and to a simple search procedure in another. We show that our joint staffing and control scheme is nearly optimal for large systems. Furthermore, it performs extremely well even for relatively small systems.

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“…Recently, Zhang and Cooper [32] studied dynamic pricing for multiple products; Elmaghraby, Gulcu, and Keskinocak [8] and Yossi and Pazgal [31] studied dynamic pricing in the presence of strategic consumers. Aydin and Ziya [2] investigated the dynamic pricing of promotional products under upselling. In these work, inventories are limited, whereas in our system, they are perishable and continuously replenished.…”

Section: Introductionmentioning

confidence: 99%

Pricing Perishable Products With Compound Poisson Demands

Guo¹,

Lian²,

Wang³

2011

Prob. Eng. Inf. Sci.

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We consider the dynamic pricing problem of perishable products in a system with a constant production rate. Potential demands arrive according to a compound Poisson process, and are price-sensitive. We carry out the sample path analysis of the inventory process and by using level-crossing method, we derive its stationary distribution given a pricing function. Based on the distribution, we express the average profit function. By a stochastic comparison approach, we characterize the pricing strategy given different customers willingness-to-pay functions. Finally, we provide an approximation algorithm to calculate the optimal pricing function.

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Pricing Promotional Products Under Upselling

Cited by 61 publications

References 23 publications

Locational tying of complementary retail items

Locational tying of complementary retail items

When Promotions Meet Operations: Cross-Selling and Its Effect on Call Center Performance

Pricing Perishable Products With Compound Poisson Demands

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