EXPRESS: Subscription Pricing for Free Delivery Services

IF 4.8 3区 管理学 Q1 ENGINEERING, MANUFACTURING Production and Operations Management Pub Date : 2024-02-14 DOI:10.1177/10591478241235001
Anantaram Balakrishnan, Shankar Sundaresan, Chinmoy Mohapatra
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Abstract

Many firms that offer home delivery of products purchased online now provide consumers the option of subscribing to a membership plan for free delivery of limited or unlimited number of orders instead of customers paying delivery charges for each order. This paper seeks to understand the benefits to firms and consumers of introducing such free-delivery subscription (FDS) plans to complement their traditional pay-for-delivery (PFD) option, characterize the firm's optimal FDS subscription pricing strategy, and study the effects of product, consumer, and market characteristics on the subscription fees and firm's profits. We develop and analyze an economic model that incorporates salient features of product delivery settings that prior models of subscription pricing do not fully capture. The features include simultaneous availability of PFD and FDS options, lift in a consumer's demand when she switches from PFD to FDS, the possibility of attracting new consumers when the firm introduces FDS, and order batching by customers due to per-order delivery charges and free-delivery order allowances. Our utility-based approach to model consumers' purchasing choices incorporates consumer heterogeneity both in terms of their utility for the product and their shopping preference under the PFD option. For homogeneous consumers, we show that introducing a FDS plan raises the firm's profit, establish the optimality of offering unlimited free-delivery allowance, and analyze comparative statics. With multiple customer types, our analysis of two subscription pricing strategies for FDS plans – a single “Universal” plan and multiple “Tiered” plans with varying subscription fees and free-delivery limits – leads to several interesting insights on delivery pricing strategies, as well as drivers and sensitivity of the optimal policy, profits, and number of subscribers. We supplement this analysis with extensive computational experiments that reveal a substantial increase in profits when a firm adds one or more FDS plans to its PFD option even though the optimal subscription fee(s) only covers part of the firm's actual shipping costs. These results also permit us to gauge the influence and understand the trends in the profitability of the Universal and Tiered plans as various parameters change.
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快递:免费递送服务的订阅定价
现在,许多提供送货上门服务的公司都为消费者提供了一个选择,即订购一个会员计划,可以免费送货上门,送货数量有限或无限,而不是客户为每个订单支付送货费。本文旨在了解推出这种免费送货订购(FDS)计划来补充传统的付费送货(PFD)选择给企业和消费者带来的好处,描述企业的最佳 FDS 订购定价策略,并研究产品、消费者和市场特征对订购费和企业利润的影响。我们建立并分析了一个经济模型,该模型结合了产品交付环境的显著特征,而之前的订阅定价模型并没有完全捕捉到这些特征。这些特征包括同时提供 PFD 和 FDS 选项、消费者从 PFD 转向 FDS 时需求的提升、企业引入 FDS 时吸引新消费者的可能性,以及客户因按订单交付费用和免费交付订单补贴而进行的订单分批。我们基于效用的消费者购买选择模型包含了消费者在产品效用和 PFD 方案下的购物偏好方面的异质性。对于同质消费者,我们证明了引入免费配送计划会提高企业利润,确定了提供无限免费配送津贴的最优性,并分析了比较静态。在有多种客户类型的情况下,我们对 FDS 计划的两种订阅定价策略--单一的 "通用 "计划和具有不同订阅费用和免费配送限额的多个 "分层 "计划--进行了分析,从而对配送定价策略以及最优政策、利润和用户数量的驱动因素和敏感性提出了一些有趣的见解。我们通过大量的计算实验对这一分析进行了补充,实验结果表明,当企业在其 PFD 选项中增加一个或多个 FDS 计划时,利润会大幅增加,即使最优订阅费用仅涵盖了企业实际运输成本的一部分。这些结果还使我们能够衡量通用计划和分层计划在各种参数变化时对利润率的影响并了解其趋势。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
Production and Operations Management
Production and Operations Management 管理科学-工程:制造
CiteScore
7.50
自引率
16.00%
发文量
278
审稿时长
24 months
期刊介绍: The mission of Production and Operations Management is to serve as the flagship research journal in operations management in manufacturing and services. The journal publishes scientific research into the problems, interest, and concerns of managers who manage product and process design, operations, and supply chains. It covers all topics in product and process design, operations, and supply chain management and welcomes papers using any research paradigm.
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