Service product pricing strategies based on time-sensitive customer choice behavior

Abstract

Product pricing strategy has a significant impact on a service company's competitive edge. Considering the heterogeneous and time-sensitive customer choice behavior, monopoly service companies price their service products depending on cost parameters as well as time-sensitive customer choice behavior. According to the different time sensitivity, customers are classed into two groups (i.e., two market segments). By considering the impact of customer choice behavior, this paper investigates how a monopoly service firm decides its service product's response time and price under two product design strategies, i.e., offering two service products respectively to two market segments, or offering one standard service product to two market segments. Results indicate that, under the two strategies, the service firm adopts a segmented pricing strategy based on the customer perceived values and time-sensitive degrees. Besides, the service firm's profit under the strategy of offering two products is always higher than that under the other strategy. This indicates that, along with the individuation of customer demand, firms should firstly segment the market, and then, design targeted products for different customers. As a result, the degree of customer satisfaction can be increased, and firms can obtain higher profits.

Understanding Optimal Business Model of Free-Floating Bike-Sharing Platform in the Context of Low-Carbon City

“…Shang and Liu [46] adopt a two-stage game to study the time-sensitive and quality-sensitive customer, and prove that quality differentiation plays a dual role in the time-based competition, either helping companies with larger time competitive advantage compete more effectively, or helping companies with smaller time competitive advantage seize the market and protect their market advantages. Zhang et al [47] study the strategy of monopolizing the service industry segment based on customer's time-sensitivity, compare the most profitable of the two strategies and find that the optimal profit of providing one service is always lower than the differentiation strategy. Li et al [48] study the impact of price sensitivity and delivery time on demand based on the supermodular game theory.…”

Decision and Coordination of an O2O Supply Chain With Market Segmentation and Showrooming Effect

“…The above research gives the methods and benefits of market segmentation. However, market segmentation in the supply chain will lead to consumer's self-selection behavior, which will affect the decision-making of supply chain members (Zhang et al, 2017;Zhang et al, 2015). Limited research focused on the negative effects of market segmentation.…”

“…But, consumers belonging to different segments have different preferences, and thus have different substitution behaviors (Lee and Eun, 2020), which is called consumer choice behavior (Khan and Mohsin, 2017). Consumer choice behavior under market segmentation strategy has been investigated from many perspectives (Wang and Wang, 2017;Zhang et al, 2017;Yang et al, 2019;Hwang ang Park, 2016;Aviv et al, 2019), such as supply chain decisions and coordination (Buell and Kalkanci, 2021;Kabul and Parlaktürk, 2019;Wang et al, 2020;Farshbaf-Geranmayeh and Zaccour, 2021). They found that, because of consumer choice behavior, dual-channel supply chain structure is not always better than single-channel supply chain structure (Zhang et al, 2017).…”

“…Consumer choice behavior under market segmentation strategy has been investigated from many perspectives (Wang and Wang, 2017;Zhang et al, 2017;Yang et al, 2019;Hwang ang Park, 2016;Aviv et al, 2019), such as supply chain decisions and coordination (Buell and Kalkanci, 2021;Kabul and Parlaktürk, 2019;Wang et al, 2020;Farshbaf-Geranmayeh and Zaccour, 2021). They found that, because of consumer choice behavior, dual-channel supply chain structure is not always better than single-channel supply chain structure (Zhang et al, 2017). In this paper, the applicable conditions of different supply chain channel structure modes by considering both market segmentation and showrooming effect will be investigated.…”

Investigating a green supply chain with product recycling under retailer's fairness behavior

“…To attract customers, some retailers such as Tesco, Casino and Patagonia have begun to attach the carbon footprint label with the products, which helps the customers to follow every step of the manufacturing process. Some retailers pay attention in promotional advertisements, in-store and out-store banners (Jian et al [18]) while some retailers focus on time-sensitivity of consumers (Zhang et al [53]). Thus, the CLSC needs to study the effect of the manufacturer's green innovation efforts and the retailer's marketing efforts.…”