||In the marketplace, because manufacturers have same process capability and offer consumers similar product selection. As a result, most sellers can only use some approaches, for example, pricing, promotion, service or others to enhance consumers to choose them. Simultaneously, consumers have too many channels to select and compare the pricing. Pricing strategy becomes important to sellers′ decision. No matter initial pricing setting or he changes his pricing during selling period. Because it not only affects consumers’ behaviors but also affects sellers’ profit. |
In this paper, we try to use a competition pricing model at a fixed period to investigate sellers’ pricing strategy and expected profit. We incorporate internal and external reference price of economics to form the consumers’ utility function. Among the internal reference price means the price of their memory. External reference price means the effects of price of competition and promotion under sale environment. Moreover, we suppose the consumer utility function follows bivariate weibull distribution. As a result, we can depict a selection model of consumer which under a duopoly marketplace.
We discuss under two environments, how influence about competition and promotion affect consumer reference price. First, we assume there are two sellers in the marketplace. If both of them without offer any promotion - a completely pricing competition environment - the variation of consumer reference price and sellers’ profit that under sellers′ pricing strategies. Second, same environment – two sellers – but one of them offers a promotion – loyalty program – to consumers. When this moment, how is the variation of consumer reference price and sellers’ profit that under sellers′ pricing strategies.
||1. Briesch, Richard A., Krishnamurthi, L., Mazumdar, T., & Raj, S. P. "A comparative analysis of reference price models."Journal of Consumer Research 24.2 (1997): 202-214.|
2. Bambauer-Sachse, Silke, and Laura Massera. "Interaction effects of different price claims and contextual factors on consumers′ reference price adaptation after exposure to a price promotion." Journal of Retailing and Consumer Services 27 (2015): 63-73.
3. Brashear-Alejandro, Thomas, Jun Kang, and Mark D. Groza. "Leveraging loyalty programs to build customer–company identification." Journal of Business Research 69.3 (2016): 1190-1198.
4. Cheng, Lillian L., and Kent B. Monroe. "An appraisal of behavioral price research (part 1): price as a physical stimulus." AMS review 3.3 (2013): 103-129.
5. Dickson, Peter R., and Alan G. Sawyer. "The price knowledge and search of supermarket shoppers." The Journal of Marketing (1990): 42-53.
6. Dowling, Grahame R., and Mark Uncles. "Do customer loyalty programs really work?." MIT Sloan Management Review 38.4 (1997): 71.
7. Evanschitzky, Heiner, et al. "Consequences of customer loyalty to the loyalty program and to the company." Journal of the Academy of Marketing Science40.5 (2012): 625-638.
8. Jacobson, Robert, and Carl Obermiller. "The formation of expected future price: A reference price for forward-looking consumers." Journal of Consumer Research 16.4 (1990): 420-432.
9. Jiang, Lan, JoAndrea Hoegg, and Darren W. Dahl. "Consumer reaction to unearned preferential treatment." Journal of Consumer Research 40.3 (2013): 412-427.
10. Krishnamurthi, Lakshman, Tridib Mazumdar, and S. P. Raj. "Asymmetric response to price in consumer brand choice and purchase quantity decisions."Journal of Consumer research 19.3 (1992): 387-400.
11. Kalyanaram, Gurumurthy, and Russell S. Winer. "Empirical generalizations from reference price research." Marketing science 14.3_supplement (1995): G161-G169.
12. Kim, Byung-Do, Mengze Shi, and Kannan Srinivasan. "Reward programs and tacit collusion." Marketing Science 20.2 (2001): 99-120.
13. Lattin, James M., and Randolph E. Bucklin. "Reference effects of price and promotion on brand choice behavior." Journal of Marketing research (1989): 299-310.
14. Lu, Jye-Chyl, and Gouri K. Bhattacharyya. "Some new constructions of bivariate Weibull models." Annals of the Institute of Statistical Mathematics42.3 (1990): 543-559.
15. Leenheer, Jorna, et al. "Do loyalty programs really enhance behavioral loyalty? An empirical analysis accounting for self-selecting members." International Journal of Research in Marketing 24.1 (2007): 31-47.
16. Lim, Sanghee, and Byungtae Lee. "Loyalty programs and dynamic consumer preference in online markets." Decision Support Systems 78 (2015): 104-112.
17. Liu, Yuping. "The long-term impact of loyalty programs on consumer purchase behavior and loyalty." Journal of Marketing 71.4 (2007): 19-35.
18. Mazumdar, Tridib, and Purushottam Papatla. "An investigation of reference price segments." Journal of Marketing Research 37.2 (2000): 246-258.
19. Mägi, Anne W. "Share of wallet in retailing: the effects of customer satisfaction, loyalty cards and shopper characteristics." Journal of Retailing79.2 (2003): 97-106.
20. Mazumdar, Tridib, S. P. Raj, and Indrajit Sinha. "Reference price research: Review and propositions." Journal of marketing 69.4 (2005): 84-102.
21. Nerlove, Marc. "Adaptive expectations and cobweb phenomena." The Quarterly Journal of Economics (1958): 227-240.
22. Singh, Siddharth S., Dipak C. Jain, and Trichy V. Krishnan. "Research Note-Customer Loyalty Programs: Are They Profitable?." Management science 54.6 (2008): 1205-1211.
23. Sinitsyn, Maxim. "Technical Note-Price Promotions in Asymmetric Duopolies with Heterogeneous Consumers." Management Science 54.12 (2008): 2081-2087.
24. So, Jing Theng, Tracey Danaher, and Samir Gupta. "What do customers get and give in return for loyalty program membership?." Australasian Marketing Journal (AMJ) 23.3 (2015): 196-206.
25. Uncles, Mark D., Grahame R. Dowling, and Kathy Hammond. "Customer loyalty and customer loyalty programs." Journal of consumer marketing 20.4 (2003): 294-316.
26. Winer, Russell S. "A reference price model of brand choice for frequently purchased products." Journal of consumer research 13.2 (1986): 250-256.
27. Wulf, Kristof De, Gaby Odekerken-Schröder, and Dawn Iacobucci. "Investments in consumer relationships: A cross-country and cross-industry exploration." Journal of marketing 65.4 (2001): 33-50.
28. Zeithaml, Valarie A., Katherine N. Lemon, and Roland T. Rust. Driving customer equity: How customer lifetime value is reshaping corporate strategy. Simon and Schuster, 2001.