How customisation of pricing and item availability information can improve e-commerce performance

Abstract

Two characteristics of e-commerce, the ability to micromarket (ie, customising a marketing plan according to customers’ purchasing patterns) and the ability to selectively offer item availability information (ie, manipulating whether or not to display the total number of items available to customers), considerably increase firms’ potential to improve their performance. This paper considers e-business in the hotel and airline industries, which has two customer segments: one is the leisure segment, which focuses more on price, and the other group is the business segment, which focuses heavily on schedule. We propose an analytical model that determines the optimal pricing and demonstrates that e-business can improve its revenue by taking into account customer segmentation when offering item availability information to customers. We provide numerical examples that demonstrate that accuracy in segmenting customers and the size of each segment will influence the performance of customised marketing planning. We also present managerial implications derived from these analytical findings.