Revenue Management Of Two-Service-Product Based On Bundling Strategy

With the increasing cost of service, the competition among the service industry is becoming more and more intense. In order to keep the competition advantages, more and more service providers have chosen the bundling and overbooking strategies as a basis marketing strategy. The bundling strategy owns some new characteristics under the condition of stochastic demand. On the one hand, the differences of service products may affect the decision making of the marketing strategy. On the other hand, the interactions of marketing strategy, pricing and overbooking strategy make the process of decision making become more commensal. Thus, joint decision making strategy should be applied. This paper aims to propose an optimal overbooking and pricing strategy for service providers based on the study of marketing, pricing and overbooking strategy of two-service-product under stochastic demand.Firstly, this paper studies the optimal pricing and overbooking decision problem of complementary services products under separate sales strategy. Secondly, the optimal pricing and overbooking strategy of single and composite service products under mixed bundling strategy is also studied. Finally, an extensive numerical studies are conducted to explore the effect of complementarity between the separated service, substitutability between the separated and modularized service, on the optimal decisions of service provider. The experimental results show: the service provider obtains a lower profit when the substitution effect between the single and the composite service products decreases under the mixed bundling strategy; the service provider obtains optimal overbooked quantity, pricing and a higher profit when the complementary effect between single service products decrease under the separating sales strategy; under the bundling strategy, decreasing of complementary effect between the single service produces, increasing of the optimal price and overbooked quantity of single service product and optimal price of the composite service products, and decreasing of the overbooked quantity, will result in the increasing of the total profit. In addition, the expected shortage quantity affects the effectiveness of bundling strategy, and only when the expected shortage quantity is in the interval decided by the parameters, the bundling strategy is dominant to the separating sales strategy, otherwise, the separating sales strategy is dominant.The result of the paper offers a practical and theoretical guidance for service provider when they are making overbooking and pricing decision.