Optimizing price levels in e-commerce applications: an empirical study
Research output: Contributions to collected editions/works › Article in conference proceedings › Research › peer-review
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ICE-B 2009 - International Conference on e-Business, Proceedings. Science and Technology Publications, Lda (SciTePress), 2009. p. 37-43 (Proceedings of the International Conference on e-Business).
Research output: Contributions to collected editions/works › Article in conference proceedings › Research › peer-review
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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 -