IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v267y2018i2p612-627.html
   My bibliography  Save this article

Optimizing online recurring promotions for dual-channel retailers: Segmented markets with multiple objectives

Author

Listed:
  • Jiang, Yuanchun
  • Liu, Yezheng
  • Shang, Jennifer
  • Yildirim, Pinar
  • Zhang, Qingfu

Abstract

Online promotion helps enhance brand awareness and boost sales. Although it attracts customer traffic, an ill-conceived price promotion has serious repercussions because it disproportionately draws bargain hunters, results in profit erosion and causes operational chaos due to erratic demands. This research proposes a long-term optimization model to help dual channel (click-and-mortar) retailers understand the conditions necessary to promote products online across all markets. When partial markets are recommended, we investigate how to price and select the market portfolio for promotion in each time period. We develop a multi-objective evolutionary algorithm to efficiently solve complex and large-scale problems. Both theoretical analysis and numerical study show that the proposed model outperforms the conventional strategy of promoting online across the board.

Suggested Citation

  • Jiang, Yuanchun & Liu, Yezheng & Shang, Jennifer & Yildirim, Pinar & Zhang, Qingfu, 2018. "Optimizing online recurring promotions for dual-channel retailers: Segmented markets with multiple objectives," European Journal of Operational Research, Elsevier, vol. 267(2), pages 612-627.
  • Handle: RePEc:eee:ejores:v:267:y:2018:i:2:p:612-627
    DOI: 10.1016/j.ejor.2017.11.059
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221717310706
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yuan, Hong & Krishna, Aradhna, 2008. "Pricing of mall services in the presence of sales leakage," Journal of Retailing, Elsevier, vol. 84(1), pages 95-117.
    2. Bart J. Bronnenberg & Vijay Mahajan, 2001. "Unobserved Retailer Behavior in Multimarket Data: Joint Spatial Dependence in Market Shares and Promotion Variables," Marketing Science, INFORMS, vol. 20(3), pages 284-299, October.
    3. Yue, Xiaohang & Liu, John, 2006. "Demand forecast sharing in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 174(1), pages 646-667, October.
    4. repec:spr:compst:v:51:y:2000:i:3:p:479-494 is not listed on IDEAS
    5. Benjamin Edelman & Sonia Jaffe & Scott Duke Kominers, 2016. "To Groupon or not to Groupon: The profitability of deep discounts," Marketing Letters, Springer, vol. 27(1), pages 39-53, March.
    6. Mei Xue & Lorin M. Hitt & Patrick T. Harker, 2007. "Customer Efficiency, Channel Usage, and Firm Performance in Retail Banking," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 535-558, April.
    7. Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.
    8. Zhou, Yong-Wu & Cao, Bin & Tang, Qinshen & Zhou, Wenhui, 2017. "Pricing and rebate strategies for an e-shop with a cashback website," European Journal of Operational Research, Elsevier, vol. 262(1), pages 108-122.
    9. Liu, Yong & Qin, Fei & Fry, Michael J. & Raturi, Amitabh S., 2012. "Multi-period modeling of two-way price commitment under price-dependent demand," European Journal of Operational Research, Elsevier, vol. 221(3), pages 546-556.
    10. Yuanchun Jiang & Jennifer Shang & Chris F. Kemerer & Yezheng Liu, 2011. "Optimizing E-tailer Profits and Customer Savings: Pricing Multistage Customized Online Bundles," Marketing Science, INFORMS, vol. 30(4), pages 737-752, July.
    11. Chris Forman & Anindya Ghose & Avi Goldfarb, 2009. "Competition Between Local and Electronic Markets: How the Benefit of Buying Online Depends on Where You Live," Management Science, INFORMS, vol. 55(1), pages 47-57, January.
    12. Krishnan Anand & Ravi Anupindi & Yehuda Bassok, 2008. "Strategic Inventories in Vertical Contracts," Management Science, INFORMS, vol. 54(10), pages 1792-1804, October.
    13. Wang, Rui & Purshouse, Robin C. & Fleming, Peter J., 2015. "Preference-inspired co-evolutionary algorithms using weight vectors," European Journal of Operational Research, Elsevier, vol. 243(2), pages 423-441.
    14. Raza, Syed Asif & Turiac, Mihaela, 2016. "Joint optimal determination of process mean, production quantity, pricing, and market segmentation with demand leakage," European Journal of Operational Research, Elsevier, vol. 249(1), pages 312-326.
    15. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    16. Arun Sundararajan, 2004. "Nonlinear Pricing of Information Goods," Management Science, INFORMS, vol. 50(12), pages 1660-1673, December.
    17. Lei, Yu & Gong, Maoguo & Zhang, Jun & Li, Wei & Jiao, Licheng, 2014. "Resource allocation model and double-sphere crowding distance for evolutionary multi-objective optimization," European Journal of Operational Research, Elsevier, vol. 234(1), pages 197-208.
    18. Xiao, Jing & Wu, Zhou & Hong, Xi-Xi & Tang, Jian-Chao & Tang, Yong, 2016. "Integration of electromagnetism with multi-objective evolutionary algorithms for RCPSP," European Journal of Operational Research, Elsevier, vol. 251(1), pages 22-35.
    19. Lemmens, A. & Croux, C. & Stremersch, S., 2012. "Dynamics in international market segmentation of new product growth," Other publications TiSEM 306086bd-670f-48d2-97d1-3, Tilburg University, School of Economics and Management.
    20. Tammy Drezner & Zvi Drezner & Shogo Shiode, 2002. "A Threshold‐Satisfying Competitive Location Model," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 287-299, May.
    21. Zhang, Michael & Bell, Peter C., 2007. "The effect of market segmentation with demand leakage between market segments on a firm's price and inventory decisions," European Journal of Operational Research, Elsevier, vol. 182(2), pages 738-754, October.
    22. Su, Meng & Zheng, Xiaona & Sun, Luping, 2014. "Coupon Trading and its Impacts on Consumer Purchase and Firm Profits," Journal of Retailing, Elsevier, vol. 90(1), pages 40-61.
    23. Lu, Qihui & Shi, Victor & Huang, Jiazhou, 2018. "Who benefit from agency model: A strategic analysis of pricing models in distribution channels of physical books and e-books," European Journal of Operational Research, Elsevier, vol. 264(3), pages 1074-1091.
    24. Nicholas C. Petruzzi & Maqbool Dada, 1999. "Pricing and the Newsvendor Problem: A Review with Extensions," Operations Research, INFORMS, vol. 47(2), pages 183-194, April.
    25. Lemmens, Aurélie & Croux, Christophe & Stremersch, Stefan, 2012. "Dynamics in the international market segmentation of new product growth," International Journal of Research in Marketing, Elsevier, vol. 29(1), pages 81-92.
    26. B.C. Giri & S. Bardhan & T. Maiti, 2016. "Coordinating a three-layer supply chain with uncertain demand and random yield," International Journal of Production Research, Taylor & Francis Journals, vol. 54(8), pages 2499-2518, April.
    27. Christian Borgs & Ozan Candogan & Jennifer Chayes & Ilan Lobel & Hamid Nazerzadeh, 2014. "Optimal Multiperiod Pricing with Service Guarantees," Management Science, INFORMS, vol. 60(7), pages 1792-1811, July.
    28. Vidyanand Choudhary, 2010. "Use of Pricing Schemes for Differentiating Information Goods," Information Systems Research, INFORMS, vol. 21(1), pages 78-92, March.
    29. R. Venkatesh & Wagner Kamakura, 2003. "Optimal Bundling and Pricing under a Monopoly: Contrasting Complements and Substitutes from Independently Valued Products," The Journal of Business, University of Chicago Press, vol. 76(2), pages 211-232, April.
    30. Daniel Serra & Charles Revelle & Ken Rosing, 1999. "Surviving in a competitive spatial market: The threshold capture model," Economics Working Papers 359, Department of Economics and Business, Universitat Pompeu Fabra.
    31. Chen, Bintong & Chen, Jing, 2017. "When to introduce an online channel, and offer money back guarantees and personalized pricing?," European Journal of Operational Research, Elsevier, vol. 257(2), pages 614-624.
    32. Tatsiana Levina & Yuri Levin & Jeff McGill & Mikhail Nediak, 2009. "Dynamic Pricing with Online Learning and Strategic Consumers: An Application of the Aggregating Algorithm," Operations Research, INFORMS, vol. 57(2), pages 327-341, April.
    33. Tianhu Deng & Zuo-Jun Max Shen & J. George Shanthikumar, 2014. "Statistical Learning of Service-Dependent Demand in a Multiperiod Newsvendor Setting," Operations Research, INFORMS, vol. 62(5), pages 1064-1076, October.
    34. Bhattacharjee, Sudip & Ramesh, R., 2000. "A multi-period profit maximizing model for retail supply chain management: An integration of demand and supply-side mechanisms," European Journal of Operational Research, Elsevier, vol. 122(3), pages 584-601, May.
    35. Dieter Debels & Mario Vanhoucke, 2007. "A Decomposition-Based Genetic Algorithm for the Resource-Constrained Project-Scheduling Problem," Operations Research, INFORMS, vol. 55(3), pages 457-469, June.
    36. Jörg Fliege & Benar Fux Svaiter, 2000. "Steepest descent methods for multicriteria optimization," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 51(3), pages 479-494, August.
    37. S. Sriram & Manohar U. Kalwani, 2007. "Optimal Advertising and Promotion Budgets in Dynamic Markets with Brand Equity as a Mediating Variable," Management Science, INFORMS, vol. 53(1), pages 46-60, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qifan Hu & Bing Xu, 2019. "Differential Game Analysis of Optimal Strategies and Cooperation in Omni-Channel Organic Agricultural Supply Chain," Sustainability, MDPI, Open Access Journal, vol. 11(3), pages 1-34, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:267:y:2018:i:2:p:612-627. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/locate/eor .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.