Research On Determining The Optimal Warranty Price Based On Various Customers Risk Preferences

Product warranty service as a sales tool of enterprises to attract consumers can consolidate enterprises’ own development. It has become the important tool of the enterprises to improve product quality and promote new products. Product warranty also can increase the enterprises’ new profit channel, and make consumers to purchase products of a certain security.Therefore, manufacturers, retailers and consumers all pay more attention to product warranty than before. But manufacturers want to get warranty service become the new means for the enterprise market competition, the rational pricing of the extended warranty profit maximization is the key problem. When warranty prices are lower, there may be more customers to buy the warranty. So the warranty profits may increase, the lower warranty prices bring the positive role of enterprise profit. But when warranty prices are lower, the enterprise of the warranty costs also increase, as profits will lose, as seen in this level, the lower warranty prices also bring negative effect to the enterprise. Therefore, a warranty price or the equilibrium of the positive and negative effect which can make manufacturers profit maximum should be sought out.Whether consumers choose warranty services depends on the product failure rate that the consumers think. If consumers think the product failure rate is high, they will buy the warranty services in order to ensure the use of the product. Consumers of different risk preference estimate risk differently so that the consumer behavior will be different accordingly. In real life, there are three type of risk preference:risk appetite, risk aversion and risk neutral. However, most researches only consider risk neutral and risk aversion, seldom researches consider various risk preference. From a practical perspective, considering various risk preference warranty pricing is more practical significance. On the basis of summarizing the related theory, this paper study determining the optimal warranty price based on customers risk preferences. When manufacturer get the free warranty policy, to make the manufacturer’s profit maximization as the goal, the model of determining the optimal warranty price without customers risk references and the model of determining the optimal warranty price based on customers risk references are set up. Through example analysis and contrast model, the reliability and validity of model can be validated. The conclusion can be found that the warranty profit from the model is higher than another. This paper also analyzes the relevant parameters on the two kinds of the influence of the pricing strategy and the manufacturer benefits, validates the correctness of this article related conclusions, and shows the practical significance of this study intuitively.Market segmentation can be based on customers risk preferences. When more risk aversion customers are in market, the manufacturers should make higher warranty price in order to get more guarantee profits. On the contrary, when more risk appetite customers are in market, the manufacturers should make lower warranty price in order to get more guarantee profitsThe conclusion of this study will help to provide some more effective pricing methods for enterprises, gain some valuable policies to the enterprise operation management to enable the enterprises get the optimal profits, and provide some guidance significance to the subsequent research.