Probabilistic Selling Research Under Customer Risk Appetite

In the modern business, how to charge to the different degrees of price-sensitiveconsumers has been a problem for retailers. Since the1990s, with the advancement ofscience and technology, e-commerce has developed rapidly, but also provides a newplatform for the new business model. For example, as the representative of reverseauction Priceline model is a typical example. Based on customer’s affirmation forfuzzy sales in the Priceline.com booking website, and specific examples occur in thesurrounding, two new concepts,“Probabilistic Goods” and “Probabilistic Selling”, areintroduced firstly. Probabilistic goods refer to a type of virtual product which createdin a series of products by vendor-specific probability. Probability Sales is a salesstrategy for probabilistic goods. Vendors use their existing products or services tocreate probabilistic goods, and provide an additional purchase options for potentialbuyers.This paper presents a probabilistic selling model assumption, gives the selleroptimal sale strategy, and the realization of the conditions for seller’s maximum profit.Then, based on the original assumptions, respectively, expand the customer’s generaldistribution, demand uncertainty and product inventory constraints. By comparing thetraditional marketing strategies, we find the probability selling has more broadapplication prospect, and demand uncertainty is also conducive to the probabilityselling. When taking into account the demand uncertainty and resource constraints,we must ensure that the resource constraints are in the appropriate level. And themarket degree of uncertainty is at a high level. So it can reduce these negative factorsfor probabilistic selling.In addition, the probabilistic goods which are presented to the customer arecertain of gambling. Customers may wish to spend less money to get what theyconsider a higher residual value of the product. From the view of consumer’s behavior,it’s the first time to introduce the customer risk appetite to the probabilistic selling.Firstly, we take into account probabilistic selling as a means of segmenting a market.As customer product preferences will inevitably affect the profits of sellers, it’snecessary for us to consider the customer risk. Secondly, we establish probability sales mathematical model under customer risk appetite. Then we proof that thecustomer’s risk preferences will affect pricing as well as the market share of theprobabilistic goods. Finally, by taking numerical analysis combined with Matlabsoftware and Genetic Algorithm, we find that dominant strategy always exists forsellers, and vendors will achieve the largest profit while specifying a variety ofproducts with the same probability.