Service product pricing strategies based on time-sensitive customer choice behavior

Xuemei Zhang; Malin Song; Guangdong Liu

doi:10.3934/jimo.2016018

Article Contents

2017, Volume 13, Issue 1: 297-312. Doi: 10.3934/jimo.2016018

This issue Previous Article Multivariate spectral DY-type projection method for convex constrained nonlinear monotone equations Next Article Higher-order sensitivity analysis in set-valued optimization under Henig efficiency

Service product pricing strategies based on time-sensitive customer choice behavior

1.
School of Business, Anhui Provincial Key Laboratory of Regional Logistics Planning, and Modern Logistics Engineering, Fuyang Normal University, Fuyang, Anhui 236037, China
2.
School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, Anhui 233030, China

* Corresponding author: Xuemei Zhang
* Corresponding author: Xuemei Zhang

Received: March 2015

Published: August 2017

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Abstract

Product pricing strategy has a significant impact on a service company's competitive edge. Considering the heterogeneous and time-sensitive customer choice behavior, monopoly service companies price their service products depending on cost parameters as well as time-sensitive customer choice behavior. According to the different time sensitivity, customers are classed into two groups (i.e., two market segments). By considering the impact of customer choice behavior, this paper investigates how a monopoly service firm decides its service product's response time and price under two product design strategies, i.e., offering two service products respectively to two market segments, or offering one standard service product to two market segments. Results indicate that, under the two strategies, the service firm adopts a segmented pricing strategy based on the customer perceived values and time-sensitive degrees. Besides, the service firm's profit under the strategy of offering two products is always higher than that under the other strategy. This indicates that, along with the individuation of customer demand, firms should firstly segment the market, and then, design targeted products for different customers. As a result, the degree of customer satisfaction can be increased, and firms can obtain higher profits.

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Mathematics Subject Classification: Primary: 91B24, 91B42; Secondary: 90B60.

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Figure 1. The impact of perceived values $v_{h}$ and $v_{l}$ on response time

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Figure 3. The impact of perceived values $v_{h}$ and $v_{l}$ on profit

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Figure 2. The impact of perceived values $v_{h}$ and $v_{l}$ on price

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Figure 4. The impact of perceived values $v_{h}$ and $v_{l}$ on response time

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Figure 6. The impact of perceived values $v_{h}$ and $v_{l}$ on profit

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Figure 5. The impact of perceived values $v_{h}$ and $v_{l}$ on price

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Figure 7. The optimal response times under SS and MS strategies

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Figure 9. The optimal profits under SS and MS strategies

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Figure 8. The optimal prices under SS and MS strategies

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