Research on firm's joint decision of pricing, ordering and gift cards promotion strategy

Abstract

In recent years, with the intensification of market competition, more and more firms tend to use gift cards promotion. In this paper, we consider a retailer offers gift cards to consumers, and assume that the demand is deterministic, then, we use linear function to describe the retailer's market demand in the condition of no gift card promotion and offering gift cards promotion. Finally, we establish retailer's maximized profit function and derive the optimal solution, so that we obtain a firm's optimal pricing, ordering and gift cards promotion policies. The analysis shows that gift cards programs can result in substantial increases in profit depending on three important factors - the future cash purchase offset, the margin on sales and the reference price.