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An assortment-wide decision-support system for dynamic pricing and promotion planning in DIY retailing


Natter, Martin; Reutterer, Thomas; Mild, Andreas; Taudes, Alfred (2007). An assortment-wide decision-support system for dynamic pricing and promotion planning in DIY retailing. Marketing Science, 26(4):576-583.

Abstract

The main objective of this report is to describe a decision-support system for dynamic retail pricing and pro-motion planning. Our weekly demand model incorporates price, reference price effects, seasonality, article availability information, features, and discounts. Building on previous research, we quantify demand interdependencies and integrate the resulting profit-lifting effects into the optimal pricing model. The methodology was developed and implemented at bauMax, an Austrian do-it-yourself retailer. Along with the practical requirements, an objective function was employed that can be used as a vehicle for implementing a retailer’s strategy.
Eight pricing rounds with thousands of different stock-keeping units have each served as a testing ground for our approach. Based on various benchmarking methods, a positive impact on profit was reported. The currently implemented marketing decision-support system increased gross profit on average by 8.1 and sales by 2.1%.

Abstract

The main objective of this report is to describe a decision-support system for dynamic retail pricing and pro-motion planning. Our weekly demand model incorporates price, reference price effects, seasonality, article availability information, features, and discounts. Building on previous research, we quantify demand interdependencies and integrate the resulting profit-lifting effects into the optimal pricing model. The methodology was developed and implemented at bauMax, an Austrian do-it-yourself retailer. Along with the practical requirements, an objective function was employed that can be used as a vehicle for implementing a retailer’s strategy.
Eight pricing rounds with thousands of different stock-keeping units have each served as a testing ground for our approach. Based on various benchmarking methods, a positive impact on profit was reported. The currently implemented marketing decision-support system increased gross profit on average by 8.1 and sales by 2.1%.

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16 citations in Web of Science®
21 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2007
Deposited On:09 Dec 2016 11:50
Last Modified:09 Dec 2016 11:52
Publisher:Informs - The Institute for Operations Research and the Management Sciences
ISSN:0732-2399
Publisher DOI:https://doi.org/10.1287/mksc.1060.0217
Other Identification Number:merlin-id:14201

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