IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v12y2024i21p3364-d1507588.html
   My bibliography  Save this article

Unlocking Market Potential: Strategic Consumer Segmentation and Dynamic Pricing for Balancing Loyalty and Deal Seeking

Author

Listed:
  • Limor Dina Gonen

    (Department of Economics and Business Administration, Ariel University, Ariel 40700, Israel)

  • Tchai Tavor

    (Department of Economics, The Max Stern Academic College of Emek Yezreel, Emek Yezreel 19300, Israel)

  • Uriel Spiegel

    (Department of Management, Bar-Ilan University, Ramat Gan 5290002, Israel)

Abstract

Background: This paper examines the economic implications of market segmentation on consumer purchasing behavior with a particular emphasis on intertemporal pricing strategies in dynamic markets. Methods: In order to analyze optimal discount rates and the timing for price reductions for consumer segments, including loyal and deal-prone customers, a detailed mathematical model was developed. The model incorporates theories of consumer behavior and pricing elasticity to simulate market responses to price changes throughout a product’s lifecycle. Results: This research indicates that market segmentation enhances sales by targeting the distinct preferences of loyal consumers, who are less price-sensitive and who stabilize revenue streams, and deal-prone consumers, who respond to price reductions. Customizing pricing strategies for loyal consumers and deal-prone consumers increases sales volumes and optimizes profitability. Conclusions: This research improves our comprehension of market segmentation and dynamic pricing, providing a practical framework for businesses to create effective pricing strategies that can be promptly implemented. It emphasizes the significance of understanding consumer behavior and price sensitivity in the interest of revenue promotion. This study also emphasizes the social implications of equitable pricing practices, promoting the implementation of transparent and value-based strategies to promote market inclusivity and consumer trust.

Suggested Citation

  • Limor Dina Gonen & Tchai Tavor & Uriel Spiegel, 2024. "Unlocking Market Potential: Strategic Consumer Segmentation and Dynamic Pricing for Balancing Loyalty and Deal Seeking," Mathematics, MDPI, vol. 12(21), pages 1-31, October.
    • Handle: RePEc:gam:jmathe:v:12:y:2024:i:21:p:3364-:d:1507588
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/12/21/3364/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/12/21/3364/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johanna Gummerus & Veronica Liljander & Emil Weman & Minna Pihlström, 2012. "Customer engagement in a Facebook brand community," Management Research Review, Emerald Group Publishing Limited, vol. 35(9), pages 857-877, August.
    2. Arnab Mitra & Arnav Jain & Avinash Kishore & Pravin Kumar, 2022. "A Comparative Study of Demand Forecasting Models for a Multi-Channel Retail Company: A Novel Hybrid Machine Learning Approach," SN Operations Research Forum, Springer, vol. 3(4), pages 1-22, December.
    3. Scott A. Neslin & Caroline Henderson & John Quelch, 1985. "Consumer Promotions and the Acceleration of Product Purchases," Marketing Science, INFORMS, vol. 4(2), pages 147-165.
    4. David Besanko & Wayne L. Winston, 1990. "Optimal Price Skimming by a Monopolist Facing Rational Consumers," Management Science, INFORMS, vol. 36(5), pages 555-567, May.
    5. Gurumurthy Kalyanaram & Russell S. Winer, 1995. "Empirical Generalizations from Reference Price Research," Marketing Science, INFORMS, vol. 14(3_supplem), pages 161-169.
    6. Jagrook Dawra & Kanupriya Katyal, 2023. "Decoding price promotions: a moderated mediation model of fairness, trust, and deal proneness," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(4), pages 248-265, August.
    7. Xuemei Sun & Jean-Éric Pelet & Shiying Dai & Yi Ma, 2023. "The Effects of Trust, Perceived Risk, Innovativeness, and Deal Proneness on Consumers’ Purchasing Behavior in the Livestreaming Social Commerce Context," Sustainability, MDPI, vol. 15(23), pages 1-14, November.
    8. Andrey Tyulin & Alexander Chursin, 2020. "The Fundamentals of Product Life Cycle Economics," Springer Books, in: The New Economy of the Product Life Cycle, chapter 0, pages 1-50, Springer.
    9. Xingxing Chen & Jacob Feldman & Seung Hwan Jung & Panos Kouvelis, 2022. "Approximation schemes for the joint inventory selection and online resource allocation problem," Production and Operations Management, Production and Operations Management Society, vol. 31(8), pages 3143-3159, August.
    10. Wu, Meng & Ran, Yun & Zhu, Stuart X., 2022. "Optimal pricing strategy: How to sell to strategic consumers?," International Journal of Production Economics, Elsevier, vol. 244(C).
    11. Garretson, Judith A. & Burton, Scot, 2003. "Highly Coupon and Sale Prone Consumers: Benefits Beyond Price Savings," Journal of Advertising Research, Cambridge University Press, vol. 43(2), pages 162-172, June.
    12. Ben-Zion, U. & Hibshoosh, A. & Spiegel, U., 1999. "The Optimal Face Value of a Discount Coupon," ISER Discussion Paper 0480, Institute of Social and Economic Research, Osaka University.
    13. James D. Dana & Kevin R. Williams, 2022. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," Marketing Science, INFORMS, vol. 41(5), pages 966-981, September.
    14. Donthu, Naveen & Kumar, Satish & Mukherjee, Debmalya & Pandey, Nitesh & Lim, Weng Marc, 2021. "How to conduct a bibliometric analysis: An overview and guidelines," Journal of Business Research, Elsevier, vol. 133(C), pages 285-296.
    15. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1986. "Fairness and the Assumptions of Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages 285-300, October.
    16. Mayhew, Glenn E & Winer, Russell S, 1992. "An Empirical Analysis of Internal and External Reference Prices Using Scanner Data," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(1), pages 62-70, June.
    17. Felipe Caro & Victor Martínez-de-Albéniz, 2015. "Fast Fashion: Business Model Overview and Research Opportunities," International Series in Operations Research & Management Science, in: Narendra Agrawal & Stephen A. Smith (ed.), Retail Supply Chain Management, edition 2, chapter 0, pages 237-264, Springer.
    18. Stephen Shum & Shilu Tong & Tingting Xiao, 2017. "On the Impact of Uncertain Cost Reduction When Selling to Strategic Customers," Management Science, INFORMS, vol. 63(3), pages 843-860, March.
    19. Liu, Huan & Lobschat, Lara & Verhoef, Peter C., 2018. "Multichannel Retailing: A Review and Research Agenda," Foundations and Trends(R) in Marketing, now publishers, vol. 12(1), pages 1-79, December.
    20. Steven Chen, 2019. "The Product Life Cycle and Product Design," Springer Books, in: The Design Imperative, chapter 9, pages 123-142, Springer.
    21. Namin, Aidin & Soysal, Gonca P. & Ratchford, Brian T., 2022. "Alleviating demand uncertainty for seasonal goods: An analysis of attribute-based markdown policy for fashion retailers," Journal of Business Research, Elsevier, vol. 145(C), pages 671-681.
    22. Umakanta Mishra & Jacobo Tijerina-Aguilera & Sunil Tiwari & Leopoldo Eduardo Cárdenas-Barrón, 2018. "Retailer’s Joint Ordering, Pricing, and Preservation Technology Investment Policies for a Deteriorating Item under Permissible Delay in Payments," Mathematical Problems in Engineering, Hindawi, vol. 2018, pages 1-14, February.
    23. Tchai Tavor & Limor Dina Gonen & Uriel Spiegel, 2023. "Customer Segmentation as a Revenue Generator for Profit Purposes," Mathematics, MDPI, vol. 11(21), pages 1-20, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Friesen, Mark, 2020. "A dynamic perspective on consumers’ price fairness perception: Empirical evidence from the airline industry," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 74(4), pages 403-425.
    2. Alam Kazmi, Syed Hasnain, 2015. "Developments in Promotion Strategies Review on Psychological Streams of Consumers," MPRA Paper 65424, University Library of Munich, Germany, revised 05 May 2015.
    3. Robert Slonim & Ellen Garbarino, 2009. "Similarities and differences between stockpiling and reference effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(6), pages 351-371.
    4. Biondi, Beatrice & Cornelsen, Laura & Mazzocchi, Mario & Smith, Richard, 2020. "Between preferences and references: Asymmetric price elasticities and the simulation of fiscal policies," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 108-128.
    5. Priya Jha-Dang, 2006. "A Review of Psychological Research on Consumer Promotions and a New Perspective Based on Mental Accounting," Vision, , vol. 10(3), pages 35-43, July.
    6. Shankar, Venkatesh & Kushwaha, Tarun, 2021. "Omnichannel marketing: Are cross-channel effects symmetric?," International Journal of Research in Marketing, Elsevier, vol. 38(2), pages 290-310.
    7. Liu, Hsin-Hsien & Chou, Hsuan-Yi, 2015. "The effects of promotional frames of sales packages on perceived price increases and repurchase intentions," International Journal of Research in Marketing, Elsevier, vol. 32(1), pages 23-33.
    8. Liu, Jingchen & Zhai, Xin & Chen, Lihua, 2018. "The interaction between product rollover strategy and pricing scheme," International Journal of Production Economics, Elsevier, vol. 201(C), pages 116-135.
    9. Chaab, Jafar & Zaccour, Georges, 2024. "Dynamic pricing in the presence of social externalities and reference-price effect," Omega, Elsevier, vol. 122(C).
    10. Kopalle, Praveen K. & Kannan, P.K. & Boldt, Lin Bao & Arora, Neeraj, 2012. "The impact of household level heterogeneity in reference price effects on optimal retailer pricing policies," Journal of Retailing, Elsevier, vol. 88(1), pages 102-114.
    11. Cheng, Andong & Baskin, Ernest, 2021. "Disproportionate redemption discounting: Mental accounting of discounted credit," Journal of Business Research, Elsevier, vol. 128(C), pages 156-163.
    12. Kuang, Yunjuan & Ng, Chi To, 2018. "Pricing substitutable products under consumer regrets," International Journal of Production Economics, Elsevier, vol. 203(C), pages 286-300.
    13. Praveen K. Kopalle & Carl F. Mela & Lawrence Marsh, 1999. "The Dynamic Effect of Discounting on Sales: Empirical Analysis and Normative Pricing Implications," Marketing Science, INFORMS, vol. 18(3), pages 317-332.
    14. Maier, Erik & Bornschein, Rico & Manss, Rico & Hesse, Damian, 2023. "Financial consequences of adding bricks to clicks," International Journal of Research in Marketing, Elsevier, vol. 40(3), pages 609-628.
    15. Patten, Elena & Ozuem, Wilson & Howell, Kerry & Lancaster, Geoff, 2020. "Minding the competition: The drivers for multichannel service quality in fashion retailing," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    16. Kanupriya Katyal & Vinay Kanetkar & Sanjay Patro, 2019. "What is a fair fare? Exploring the differences between perceived price fairness and perceived price unfairness," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(2), pages 133-146, April.
    17. Blömker, Jan & Albrecht, Carmen-Maria, 2024. "Psychographic segmentation of multichannel customers: investigating the influence of individual differences on channel choice and switching behavior," Journal of Retailing and Consumer Services, Elsevier, vol. 79(C).
    18. Navid Mojir & K. Sudhir, 2014. "A Model of Multi-pass Search: Price Search across Stores and Time," Cowles Foundation Discussion Papers 1942R2, Cowles Foundation for Research in Economics, Yale University, revised Feb 2020.
    19. Katina Kulow & Keith S. Coulter & Michael J. Barone & Xingbo (Bo) Li, 2022. "How internal reference prices determine when a price’s location will influence consumer judgments," Marketing Letters, Springer, vol. 33(4), pages 563-575, December.
    20. Tran, Minh Tam & Rekik, Yacine & Hadj-Hamou, Khaled, 2024. "Optimal pricing for dual-channel retailing with stochastic attraction demand model," International Journal of Production Economics, Elsevier, vol. 268(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:12:y:2024:i:21:p:3364-:d:1507588. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.