Business model selection for durable products based on price optimisation with a two-dimensional description of customers’ usage patterns

Tianzhu Ye, Liping Zhou, Shan Jiang and Zhibin Jiang

International Journal of Production Research, 2024, vol. 62, issue 6, 2176-2201

Abstract: Business models play a key role in companies’ profit growth and competitiveness. A growing number of companies not only sell products but also provide leasing services. In traditional leasing models, companies usually charge customers for the time they occupy the product, but ignore differences in how long and how often customers actually use the product. In practice, customers have different product usage patterns, which will affect their purchase choice. Considering the pooling effect in the leasing service network, this paper describes customers’ usage patterns in two dimensions (product occupancy time and utilisation rate) and determines the optimal pricing under three models (selling, leasing, and their hybrid model) to maximise corporate profits. Through comparative analysis, the optimal business model selection decision is obtained, and its market performance is also analysed. The results show that when the leasing service operational capability is strong, the pure leasing service model is superior; otherwise, the result also depends on the product value creation capability. When this capability is high, the hybrid model will be selected; otherwise, the pure selling model will be better. This result differs from the generally held result in previous studies that the hybrid model is more profitable in most cases.

Date: 2024
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DOI: 10.1080/00207543.2023.2217288

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