Managing Trade-In Programs Based on Product Characteristics and Customer Heterogeneity in Business-to-Business Markets

Li, Kate; Fong, Duncan Κ. H.; Xu, Susan H.

doi:10.2139/ssrn.1148430

Cited by 4 publications

(9 citation statements)

References 27 publications

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“…Trade-in are also widely adopted in the business-tobusiness market [14]. Companies use such a mechanism to shorten buyers' upgrade cycle for the equipment, such as large-scale communication devices, CT scanners, photocopies, computers, etc.…”

Section: Introductionmentioning

confidence: 99%

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Trade-in strategy for a durable goods firm with recovery cost

Chen

Hsu

2015

Journal of Industrial and Production Engineering

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This study deals with the trade-in rebates offered by the manufacturer to the consumers. We investigate when and how a durable goods firm should offer a trade-in rebate to collect and recover used products, in order to achieve better price discrimination and weaken competition from third-party remanufacturers. It creates segment effect by offering different prices to different groups of customers. This study determines the optimal pricing and/or trade-in rebate, and examines the strategic choice among the three options facing the firm. We develop analytic models that incorporate key features of durable goods into model formulation, namely the deterioration rate and the recovery cost of the used goods. Our research findings include: the rebate magnitude of trade-in-to-high option increases in the deterioration rate, but decreases in the customer's willingness to trade-in and the manufacturing, recovering, and maintenance costs, and the strategic choice among the three options depends critically on the two features of the deteriorating rate and recovery cost.

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Section: Introductionmentioning

confidence: 99%

“…The trade-in research from operations literature includes Agrawal et al [3], Chen and Hsu [8], Li et al [14], Li and Xu [15], Ray et al [20], and Zhang and Zhang [30]. Agrawal et al [3] investigated when and how an OEM should offer a trade-in rebate to recover used goods that incur a per-unit remanufacturing cost by the OEM.…”

Section: Introductionmentioning

confidence: 99%

Trade-in strategy for a durable goods firm with recovery cost

Chen

Hsu

2015

Journal of Industrial and Production Engineering

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“…Recent literature considered various types of incentive and promotional offers such as buy-back, trade-in rebates, product exchange to improve the collection and recovery process Ray et al, 2005;Aras and Aksen, 2008;Aksen et al, 2009;Aras et al, 2010;Kaya, 2010;Litvinchev et al, 2014;Giovanni, 2015). Guide and Van Wassenhove (2001) first discussed the importance of effective incentive mechanism in the context of collection and product recovery.…”

Section: Collection Process Of Used Productsmentioning

confidence: 99%

“…Kaya (2010) investigated the coordination issues between manufacturer and collectors as far as return of used products are concerned, and developed analytical models to determine optimal value of incentives in both centralised and decentralised business settings under stochastic demand. Litvinchev et al (2014) incorporated competitor's acquisition price and developed multi-period stochastic integer programming model to determine the pricing strategy of the remanufactured products together with the optimal network that must be designed to be the most profitable CLSC. Ray et al (2005) first analyzed the situation where a firm offers trade-in rebate to its customers to speed up customers' replacement decisions.…”

Section: Collection Process Of Used Productsmentioning

confidence: 99%

“…Using evidence from a case study, they illustrated that a trade-in programme allows a firm to practice perfect price discrimination through a customized rebate. Through an empirical research, Li et al (2011) argued that the companies involved in product recovery must include product's characteristics to design and manage trade-in programs effectively and efficiently. Shi et al (2016) developed a two-stage profit-maximization model and analyzed the effect of designing a remanufacturable product on return rate of used products and trade-in prices for remanufactured products.…”

Section: Collection Process Of Used Productsmentioning

confidence: 99%

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Design and planning of a closed-loop supply chain with three way recovery and buy-back offer

Dutta

Das

Schultmann

et al. 2016

Journal of Cleaner Production

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Using transactions data to improve consumer returns forecasting

Shang

McKie

Ferguson

et al. 2019

J of Ops Management

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Although generous return policies have been shown to have marketing benefits, such as a higher willingness to pay and a higher purchase frequency, counterbalancing these benefits is an increased volume of consumer returns, which presents significant operational challenges for both retailers and original equipment manufacturers (OEMs). Since accurate return forecasts are inputs into strategic and tactic decision support tools for operations managers, advancements in better forecast accuracy can yield significant savings from the returns management practice. We propose a forecasting approach that incorporates transaction‐level data, such as purchase and return timestamps, and predicts future return quantities using a two‐step “predict‐aggregate” process. To enhance the generalizability of our framework, we test it on two distinct datasets provided by a bricks‐and‐mortar electronics retailer and an online jewelry retailer. We find that our approach demonstrates significant forecasting error reduction, in the range of 10–20%, over benchmark models constructed from common industry practices and the existing literature. As our approach leverages the same data inputs as existing models, it can be easily adapted by practitioners. We also consider a number of extensions to generalize our approach into contexts such as restricted return time windows, new product returns, and inflated same‐day returns. Last, we discuss broad implications of return forecast accuracy improvements in the areas such as inventory management, staffing level, reverse logistics, and return recovery decisions.

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Managing Trade-In Programs Based on Product Characteristics and Customer Heterogeneity in Business-to-Business Markets

Cited by 4 publications

References 27 publications

Trade-in strategy for a durable goods firm with recovery cost

Trade-in strategy for a durable goods firm with recovery cost

Design and planning of a closed-loop supply chain with three way recovery and buy-back offer

Using transactions data to improve consumer returns forecasting

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