OPTIMIZING PRICE LEVELS IN E-COMMERCE APPLICATIONS - An Empirical Study

Burkhardt Funk

2009

Abstract

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.

Paper Citation

in Harvard Style

Funk B. (2009). OPTIMIZING PRICE LEVELS IN E-COMMERCE APPLICATIONS - An Empirical Study . In Proceedings of the International Conference on e-Business - Volume 1: ICE-B, (ICETE 2009) ISBN 978-989-674-006-1, pages 37-43. DOI: 10.5220/0002186700370043

in Bibtex Style

@conference{ice-b09,
author={Burkhardt Funk},
title={OPTIMIZING PRICE LEVELS IN E-COMMERCE APPLICATIONS - An Empirical Study},
booktitle={Proceedings of the International Conference on e-Business - Volume 1: ICE-B, (ICETE 2009)},
year={2009},
pages={37-43},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0002186700370043},
isbn={978-989-674-006-1},
}

in EndNote Style

TY - CONF
JO - Proceedings of the International Conference on e-Business - Volume 1: ICE-B, (ICETE 2009)
TI - OPTIMIZING PRICE LEVELS IN E-COMMERCE APPLICATIONS - An Empirical Study
SN - 978-989-674-006-1
AU - Funk B.
PY - 2009
SP - 37
EP - 43
DO - 10.5220/0002186700370043