Commenced in January 2007
Paper Count: 31097
Joint Optimization of Pricing and Advertisement for Seasonal Branded Products
Abstract:The goal of this paper is to develop a model to integrate “pricing" and “advertisement" for short life cycle products, such as branded fashion clothing products. To achieve this goal, we apply the concept of “Dynamic Pricing". There are two classes of advertisements, for the brand (regardless of product) and for a particular product. Advertising the brand affects the demand and price of all the products. Thus, the model considers all these products in relation with each other. We develop two different methods to integrate both types of advertisement and pricing. The first model is developed within the framework of dynamic programming. However, due to the complexity of the model, this method cannot be applicable for large size problems. Therefore, we develop another method, called hieratical approach, which is capable of handling the real world problems. Finally, we show the accuracy of this method, both theoretically and also by simulation.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1334508Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1311
 K. S. Coulter, "Decreasing price sensitivity involving physical product inventory: a yield management application", Journal of Product and Brand Management, vol. 10, pp. 301-317, 2001.
 Y. Aviv, and A. Pazgal, "A partially observed Markov decision process for dynamic pricing", Management Science, vol. 51, pp. 1400-1416, 2005.
 T. M. Choi, "Pre-season stocking and pricing decisions for fashion retailers with multiple information updating", International Journal of Production Economics, vol. 106, pp. 146-170, 2007.
 M. Hatwin, "The practicalities and benefits of applying revenue management to grocery retailing, and the need for effective business rule management", Journal of Revenue & Pricing Management, vol. 2, pp.61-67, 2003.
 B. W. Lippman, "Retail revenue management - competitive strategy for grocery retailers", Journal of Revenue & Pricing Management, vol. 2, pp. 229-233, 2003.
 M. Modarres, and Bolandifar, "Integration of dynamic pricing and overselling with opportunistic cancellation", Iranian Journal of Operations Research, vol. 1, no.1, pp. 74-93, 2008.
 J. McGill, and G. Van Ryzin, "Revenue management: research overview and prospects", Transportation Science, vol. 33, pp. 233-256, 1999.
 W. Ch. Chiang, , J. C. H. Chen, , and X. Xu, "An overview of research on revenue management: current issues and future research", International Journal of Revenue Management, vol. 1, no. 1, pp. 97-128, 2007.
 J. P. Dube', G. J. Hitch, and D. Manchanda, "An empirical model of advertising dynamics", Quantitative Marketing and Economics, vol. 3, no. 2, pp. 107-144, 2005.
 J. D. C. Little, "BRANDAID: A marketing-mix model, Parts 1 and 2", Operations Research, vol. 23, pp. 628-673, 1975.
 J. S. Raju, "Theoretical models of sales promotions: contributions, limitations, and a future research agenda", European Journal of Operational Research, vol. 85, pp. 1-17, 1995.
 Y. Ch. Tsao, and G. J. Sheen, "Dynamic pricing, promotion and replenishment policies for a deteriorating item under permissible delay in payments", Computers & Operations Research, vol. 35, pp. 3562 - 3580, 2008.
 J. L. Zhang , J. Chen, and C. Y. Lee, "Joint optimization on pricing, promotion and inventory control with stochastic demand", International Journal of Production Economics, Vol. 116, pp. 190-198, 2008.