OPTIMIZATION OF ONLINE PROMOTION: A PROFIT-MAXIMIZING MODEL INTEGRATING PRICE DISCOUNT AND PRODUCT RECOMMENDATION

Yuanchun Jiang () and Yezheng Liu ()
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Yuanchun Jiang: School of Management, Hefei University of Technology, Hefei, Anhui 230009, China;
Yezheng Liu: School of Management, Hefei University of Technology, Hefei, Anhui 230009, China;

International Journal of Information Technology & Decision Making (IJITDM), 2012, vol. 11, issue 05, 961-982

Abstract: Price promotion and product recommendation are important tactics to gain market share in the e-commerce context. To increase sales and enhance promotion profits, practitioners often recommend non-discounted products in the promotional campaign for a product. However, no analytical model is hitherto available to jointly optimize the price discount for the promoted product and the product portfolio to recommend. This paper provides a probability model to complete the task. The proposed model motivates customers through an attractive price discount for the promoted product, while simultaneously encouraging customers to purchase the non-discounted products through the recommendation system. The numerical studies show that the proposed method attains higher profits than do conventional methods. Finally, we offer managerial insights and provide useful guidelines to help e-tailers to make the most profitable online promotional decisions.

Keywords: Online promotion; price discount; recommendation system; probability model; profit maximization (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219622012500289

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