Collaborative Promotions: Optimizing Retail Supply Chains by Daniela Wiehenbrauk

By Daniela Wiehenbrauk

Promotions are even as cherished and feared by means of either nutrition outlets and branded items brands in today’s retail atmosphere. liked simply because they allure clever consumers and generate a right away influence on a brand’s sale. Feared simply because there's uncertainty in regards to the opponents’ habit and the particular buyer call for resulting in excessive forecast mistakes. For the shop, this ends up in a doom loop of over- or understocking with excessive stock charges within the offer chain.

Collaboration among outlets and the producer disentangles the doom loop. The thesis unearths the precise style and timing of data and develops a so known as pageant Index. stock within the offer chain is eradicated and the client is served higher at a cheaper price. in accordance with a joint stock and pricing version and an empirical research, it exhibits that the availability chain potency profits from collaborative promotions lead to a win for purchasers, outlets and the producer.

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Additional resources for Collaborative Promotions: Optimizing Retail Supply Chains with Upstream Information Sharing (Lecture Notes in Economics and Mathematical Systems 643)

Example text

2005). Generally, in mature markets, customers view most brands as being adequate for their needs and hence substitutable. They want to be incentivized through promotions to switch between brands. Also, we should not forget a genuine desire to use promotions as a way to change habitual buying patterns. Promotional objectives can include attracting new or lapsed customers, in other words increasing customer penetration, increasing the loyalty of existing customers or increasing consumption (Simon and Fassnacht 2009).

26 3 Literature Review We will first review the literature on each of these dimensions of customer heterogeneity focusing on the theoretical background in order to derive the optimal promotion strategies for the retailer. We will conclude with a summary and derive a further economic explanation of promotions. Search Cost In markets with imperfect information about prices, one can observe two customer segments: uninformed and informed. The uninformed customer purchases the product at a randomly chosen retailer, whereas the informed customer incurs search cost to make his purchase at the retailer with the lowest price.

Blattberg et al. (1981) show that promotions induce “purchase acceleration” and “pre-emptive switching”. That is, customers buy larger quantities with longer purchase intervals in promotions than at regular prices. Based on diary panel data, the authors show an increase in duration until the next purchase ranging from 23% to 36% and an increase in the quantity purchased from 8% to 35% for four categories (aluminum foil, facial tissue, liquid detergent and waxed paper). Recent empirical studies show that the stockpiling effect is larger than previously believed.

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