Advance Selling Strategies For Retailers Considering The Product Diffusion Effect

With the high-speed development of technology and increasingly fierce competition in the market, the life cycle of the product in many industries such as computers, smart phones and fashion dress, becomes shorter than ever, which appears the feature of perishability. In order to grasp the demand information more quickly and accurately, retailers begin to widely adopt the advance selling mode for product selling. Pre-sale (Reservation sale) refers to the sales strategy that retailer provides consumers with the opportunity to reserve the product before its release. Unlike traditional single-stage spot sales mode, pre-sale mode divides the selling season into two periods (i.e., the advance selling period and the regular selling period). The demand of advance selling season and regular selling season depends on the consumer’s choice of the selling periods. Hence, under the pre-sale mode, the market size and distribution characteristics analysis should also consider the dynamic relevance between consumer choice behavior and the demand in different periods, as well as data statistics. Faced with ever-changing market demand, how to guide choice behavior to maximize revenue becomes a key issue for the retailer’s pre-sale policy.The rapid development of information technology makes the information exchange among consumers increasingly closer, and interdependence between the decision-making much stronger. Based on the behavior of decision-making interaction, we investigate the dynamic relation between the demand in advance selling period and that in regular selling period. By depicting the influence of early sale on the demand in regular selling season, we investigate the advance selling policy to maximize the whole revenue of the retailer.By exploring the problem above, we get some conclusions below:(1) Through the research of advance selling policy design issues on the monopoly market structure in the presence of product diffusion, we find that when both strategic consumers and myopic consumers are in the market, for a linear product diffusion effect, if the effect of product diffusion is positive, the retailer may set an extremely high advance selling price to induce the strategic consumers to purchase in the regular selling season, which is counter-intuitive. Moreover, the optimal procurement quantity for the retailer may increase in the negative effect of product diffusion and decrease in the amount of strategic consumers. When we extend our model to consider a concave quadratic product diffusion effect, however, we find that the optimal procurement quantity is concave in the amount of strategic consumers.(2)Based on the oligopolistic competition market structure, we investigate the advance selling strategies for oligopolists with different reputation when considering the product diffusion effect. We find that product diffusion effect has great effects on the firm’s pricing decision. For the firm with lower reputation, it is beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand. For the firm with higher reputation, it is also beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand if the consumers’enthusiasm for the product in regular selling season is high enough; otherwise it should not decrease his advance selling price since this practice cannot greatly increase his demand.(3) By considering the selling policy of dual-channel and cooperation mechanism for the monopolist retailer when cooperating with rebate platform. We find that product diffusion effect has great effects on the firm’s pricing decision and the cooperation mechanism with platform. Retailer’s optimal profit depends on the market size of rebates platform (potential demand), the retailer’s profits may actually decrease in the market size of rebate platform. It is beneficial for the monopolist retailer to decrease the selling price in period 1 with the diffusion effect caused by its demand in period 1. However, the retailer may increase the commission rate for the rebate platform in the product diffusion effect, which is counter-intuitive.For the discussion and analysis above, innovations and contributions of this thesis are briefly summarized as follows:(1) Based on international and domestic realistic backgrounds, the advance selling policy of a monopolist retailer with consideration of two different forms (linear and concave quadratic) of product diffusion effect is examined, then, the influence of product diffusion and strategic consumers on the advance selling pricing and ordering policy of the monopolist retailer is summarized, which to some extent fills the gaps of the current research without considering the advance selling in the presence of product diffusion effect, and provides operational managers in reality with valuable suggestions in making advance selling decisions.(2) Based on the competitive setting, we examine the advance selling strategies for oligopolists with different reputation when considering the product diffusion effect, analyze the interaction between consumer and retailer, and summarize the impact of product diffusion effect on retailer’s advance selling pricing strategies in a competitive environment.(3) We investigate the pricing policy and cooperation mechanism for the monopolist retailer when cooperating with rebate platform, develop the model of competitive dual-channel sales, and obtain the optimal pricing decisions with consideration of product diffusion effect. Moreover, we further analyze the impact of product diffusion effect on retailer’s pricing strategies and cooperation mechanism with rebate platform.