Pricing And Inventory Decisions Optimization With Novel Marketing Strategies

The huge potential of "Internet +" has motivated innovative firms,e.g.,Amazon.com,JD.com,Dangdang.com,Taobao.com,Priceline.com etc,to develop novel marketing strategies such as advance selling,probabilistic selling,flash sales etc.These marketing strategies have brought customers a new purchasing experience by providing them with more purchasing options to meet their diverse and personalized needs,thus changing customer behaviours and demand by re-segmenting customers.Consequently,these novel marketing strategies have profound effects on the structure and operations management of the supply chain and the pricing strategies,thus giving rise to new decision problems.However,the existing research mainly focuses on studying the value and decisions of these strategies from the perspective of marketing;there is little research on supply chain operations management under these novel marketing strategies.This project aims to address the following issues:1)Analysing customer behaviour and demand under novel marketing strategies by using experiment designs,and mathematical modelling.2)Deriving the optimal decisions on supply chain structure and operations management,including inventory management,pricing and promotion.3)Exploring the effects of novel marketing strategies on the performance of the whole supply chain and members’ revenues,and ascertaining the applicable contexts of the strategies.4)Exploring how to use novel marketing strategies to improve supply chain performance,including inventory reduction,risk mitigation and demand identification etc.The first part of this paper focuses on flash sale.Flash sale was initially developed to help retailers sell at discounted prices excess inventory that cannot be sold at full prices in bricks-and-mortar shops.Limited number,limited time and low price are the key characteristics of flash sale.However,retailers have increasingly opted to use flash sale platforms to sell new products in recent years.The paper considers a system consisting of a flash sale platform that has some members and a retailer that sells a new product over two consecutive periods.The retailer decides first whether to sell the product on the platform in the first period.If so,it then decides the price and quantity of the product to sell on the flash platform.These two decisions will have an impact on the demand in the second period,i.e.,normal sale,in which the new product is sold at the full price.Based on the estimated demand in the normal period,the retailer determines the inventory.Finally,the demand is realized and satisfied by the available inventory.Any unsatisfied demand is lost and any excess inventory is disposed of at a salvage value.This article will give the conditions that the retailer participates in flash sale platform,and his optimal inventory and pricing strategy after the retailer participates in the platform.Then analyze the properties of the optimal strategy.The second part of this paper focuses on probabilistic selling,it refers to that retailer combines the normal-sales products to constitute the probabilistic products,in order to provide an opportunity for consumers to get one of the normal-sales products.This paper will analyze from the perspective of operation management,consider one retailer sells products in two periods.And there are three ways to deal with the uncertainty of consumer demand,probabilistic selling(one kind of new marketing mode),quick response(one kind of new operation mode),or combination of the two modes.We will analyze the impact of each approach on retailers,decisions and profits.In addition,we will compare the situation that not considering strategic customers with the situation considering strategic customers.The third part of this paper focuses on the impact of advance selling mode on retailers.Retailers sell new products under advance selling before they officially launch the products to the mass market.Firstly,we study on the impact of strategic consumers on competing retailers adopting advance selling to sell a homogeneous new product.Second,because more and more retailers have used flash sale platform to sell new products under advance selling mode,we consider not only the consumers’ strategic and risk preference,but also the consumers’ valuation decreasing over the time.We study three newsvendor-type models in which there is a retailer that sells a new product,the demand of which is random,under advance selling.In the first model,there are no strategic customers,while in the other two models,we take strategic customers into account and the retailer has the option to use or not to use flash sale to sell its product under advance selling.In order to figure out which strategic is the optimal to retailer.In this paper,we study forward and interdisciplinary problems.We will develop a new analytical framework for supply chain operations management,inventory management and pricing management under novel marketing strategies,and provide managerial insights and guidance for firms to effectively adopt novel marketing strategies in the "Internet +"’ era.