Dynamic Discount Pricing in Competitive Marketing

Jian Chen · Lu‐Xing Yang · Da-Wen Huang · Xiaofan Yang · Yuanyan Tang

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Supply Chain and Inventory Management Consumer Market Behavior and Pricing Innovation Diffusion and Forecasting

Abstract

Discount is a frequently used marketing tool. This paper is devoted to designing an effective dynamic discount pricing (DDP) strategy in competitive marketing. First, we introduce a competitive word-of-mouth (WOM) propagation model with DDP mechanism. On this basis, we model the original problem as an optimal control problem. Next, we derive the optimality system for the optimal control problem and, thereby, propose the concept of competitive DDP strategy. Finally, through comparative experiments, we find that the profit of a competitive DDP strategy is satisfactory. Our findings contribute to maximizing the marketing profit in the presence of commercial competitors.

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References

1994Dynamic Optimal Control Models in Advertising: Recent Developments 1977Dynamic Optimal Control Models in Advertising: a Survey 2017Social Acceptance and Word of Mouth: How the Motive to Belong Leads to Divergent WOM with Strangers and Friends 2006Strategic Marketing: Creating Competitive Advantage 2017Purchase decision regret: Negative consequences of the Steadily Increasing Discount strategy 2019A discount strategy in word-of-mouth marketing 2018Discount pricing in word-of-mouth marketing: An optimal control approach 2018A dynamic discount pricing strategy for viral marketing

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