Study On The Credit Sale Decision Model Of Products In Their Declining Periods Of Life Based On The Measurement Of Demand Shifting

Facing complicated and fierce competition, more and more enterprises promote sales bytaking credit sales activities in order to expand the scale of sales and reduce inventory risks.However, because of the difference between customers’ credit rating, enterprises sustainvarying degrees of credit risk when they take credit sales activities. This requires the pricesbetween credit sales and cash sales of different credit rating are diverse, which in turn causedthe level of demand shifting is different between different credit rating. And, when productsare in declining period of life cycle, the value of them will continue to decay. Enterprises needto adjust price and sale model at the right time to achieve the maximum profit. However, theprice adjustment will not only affect the level of demand shifting, but also raise the demand oftwo sale models in the short term. Thus, it is particularly important for enterprises to measurethe cash and credit demand of each credit rating in every price adjustment period in order toimprove the accuracy of the total income estimation and credit decision.Firstly, based on the characteristics of the product in recession, considered that thedifference of credit risk between different credit rating customers, according to customerchoice behavior theory, we established a demand shifting model on the basis of implementingdynamic pricing and differential pricing strategy for different credit rating customers, inwhich, cash and credit demand of each credit rating in every price adjustment period weresolved. Secondly, based on the results of the demand estimation, we used related revenueestimation method to establish the credit revenue estimation model. And then, the optimaldecision model was set up derived from the analysis of the probability of credit discriminationand the probability of business opportunity. The model allows companies to make creditdecision within a limited period of time. Finally, we used the demand shifting model thisarticle established to estimate credit receipts and to make credit decisions. Compared with thecredit decision which is made by using previous demand shifting rate model, we concludedthat: In the same period, the higher the customer’s credit rating is, the greater the level ofdemand shifting may be. The level of demand shifting between cash sales and credit sales of each credit rating might increase over time. Furthermore, the demand shifting degree directlyaffects the proportion that the credit profit account for in total sales profit. The lager it values,the greater credit risk the enterprise will face and the more accurately it needs to judge thecustomer’s credit rating. Therefore, if the demand shifting degree between cash sales andcredit sales is greater, the enterprise should increase the research time properly and improvethe probability of correct credit rating discrimination so as to increase the total profit.