TY - CHAP

T1 - Optimizing price levels in e-commerce applications

T2 - International Conference on E-Business - 2009

AU - Funk, Burkhardt

N1 - Literaturverz. S. 43

PY - 2009/1/1

Y1 - 2009/1/1

N2 - Price dispersion in the Internet is a well studied phenomenon. It enables companies to adjust prices to a level appropriate to their strategy. This paper deals with question how Internet retailers should do so. The discussed method optimizes short-term profitability by determining the exact demand curve. The method involves the application of empirical price tests. For this purpose visitors of an Internet retailer are divided in statistically identical subgroups. Using the A-B testing method different prices are shown to each subgroup and the conversion rate as a function of price is calculated. We describe the organizational requirements, the technical approach, and the statistical analysis applied to determine the price optimizing the per-order profit. A field study carried out with a large Internet retailer is presented and shows that the company was able to optimize a specific price component and thus increase the contribution margin per order by about 7%. We conclude that the discussed method could be applied to answer further research questions such as the temporal variation of demand curves.

AB - Price dispersion in the Internet is a well studied phenomenon. It enables companies to adjust prices to a level appropriate to their strategy. This paper deals with question how Internet retailers should do so. The discussed method optimizes short-term profitability by determining the exact demand curve. The method involves the application of empirical price tests. For this purpose visitors of an Internet retailer are divided in statistically identical subgroups. Using the A-B testing method different prices are shown to each subgroup and the conversion rate as a function of price is calculated. We describe the organizational requirements, the technical approach, and the statistical analysis applied to determine the price optimizing the per-order profit. A field study carried out with a large Internet retailer is presented and shows that the company was able to optimize a specific price component and thus increase the contribution margin per order by about 7%. We conclude that the discussed method could be applied to answer further research questions such as the temporal variation of demand curves.

KW - Business informatics

KW - Curve

KW - Demand

KW - Electronic commerce

KW - Non-interactive prices

KW - Posted prices

KW - Price dispersion

KW - Price optimization

KW - Price tests

KW - Pricing strategy

UR - http://www.scopus.com/inward/record.url?scp=74549144298&partnerID=8YFLogxK

U2 - 10.5220/0002186700370043

DO - 10.5220/0002186700370043

M3 - Article in conference proceedings

SN - 978-989674006-1

T3 - Proceedings of the International Conference on e-Business

SP - 37

EP - 43

BT - ICE-B 2009 - International Conference on e-Business, Proceedings

PB - Science and Technology Publications, Lda (SciTePress)

Y2 - 7 July 2009 through 10 July 2009

ER -