Abstract

http://ssrn.com/abstract=1919153
 
 

References (61)



 


 



Dynamic Targeted Pricing in B2B Settings


Jonathan Z. Zhang


University of Washington - Michael G. Foster School of Business

Oded Netzer


Columbia Business School - Marketing

Asim Ansari


Columbia Business School - Marketing


Columbia Business School Research Paper No. 11-5

Abstract:     
We model the multifaceted impact of pricing decisions in B2B contexts and show how a seller can develop optimal inter-temporal targeted pricing strategies to maximize long-term customer value. We empirically model the B2B customer’s purchase decisions in an integrated fashion. In order to facilitate targeting and to capture the short and long-term dynamics of B2B customer purchasing, our modeling framework weaves together in a hierarchical Bayesian manner, multivariate copulas, a non-homogeneous hidden Markov model, and control functions for price endogeneity. We estimate our model on longitudinal transactions data from an aluminum retailer. We find that customers in our dataset can be best represented by two latent states - a “vigilant” state characterized by heightened price sensitivity and a cautious approach to ordering, and a more “relaxed” state. The seller’s pricing decisions can transition customers between these two states. An optimal dynamic and targeted pricing strategy based on our model suggests a 52% improvement in profitability compared to the status quo. Furthermore, a counterfactual analysis which examines the optimal policy under fluctuating commodity prices reveals that the seller should pass much of the costs to customers when commodity prices increase, but hoard most of the profit when commodity prices (seller’s costs) decrease.

Number of Pages in PDF File: 54

working papers series


Download This Paper

Date posted: August 30, 2011  

Suggested Citation

Zhang, Jonathan Z. and Netzer, Oded and Ansari, Asim, Dynamic Targeted Pricing in B2B Settings. Columbia Business School Research Paper No. 11-5. Available at SSRN: http://ssrn.com/abstract=1919153 or http://dx.doi.org/10.2139/ssrn.1919153

Contact Information

Jonathan Z. Zhang
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
Oded Netzer (Contact Author)
Columbia Business School - Marketing ( email )
New York, NY 10027
United States

Asim Ansari
Columbia Business School - Marketing ( email )
New York, NY 10027
United States

Feedback to SSRN


Paper statistics
Abstract Views: 714
Downloads: 128
Download Rank: 131,362
References:  61

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.578 seconds