Abstract
Despite the various advantages of existing warranty designs, these designs are still limited to inherent reliability and ignore the interaction between use reliability and regional difference. A new sub-region warranty differential pricing strategy based on the regional granularity of use reliability is proposed to solve these issues. A use reliability prediction model based on regional granularity partition results and after-sales failure data is established to evaluate product use reliability accurately in different sub-regions. Then, a novel high-dimensional optimization model that considers the regional difference in use reliability, warranty, and price is developed to optimize the regional warranty differential pricing strategy. Two scenarios for pricing and warranty, namely, unified and partition warranty schemes, are considered, and the necessary optimality conditions for each scenario are determined. Afterward, a practical case study is conducted in the air-conditioning industry to verify the performance of the proposed model. The sensitivity of the model is also analyzed. Numerical experiments show that the sub-region warranty differential pricing strategy allows for a suitable trade-off among use reliability, warranty, and selling price. Moderately reducing the selling price of sub-regions with high use reliability and increasing the selling price of sub-regions with low use reliability can enhance profitability. This work provides manufacturers with guidelines on designing sub-region warranty differential pricing strategies.
Highlights
Warranty, as a competitive marketing tool, is crucial in enhancing perceived customer value and stimulating market demand [1]
We developed a novel sub-region warranty differential pricing optimization strategy based on the regional granularity of use reliability and revealed the benefits of achieving balance among use reliability, warranty, and selling price
The proposed approach can ensure that the economic benefit of the regional difference in use reliability is explored to the greatest extent
Summary
As a competitive marketing tool, is crucial in enhancing perceived customer value and stimulating market demand [1]. Accurate prediction of use reliability is an important prerequisite for achieving a sub-region warranty differential pricing strategy With this concept in mind, we establish a mathematical model that reflects the quantitative relationship between use reliability and different geographical regions based on regional granularity partition results. Unlike prior work, this study investigates the quantitative relationship between use reliability and different geographical regions and evaluates the use reliability in different sub-regions on the basis of regional granularity partition results and after-sales failure data. The length of the warranty period, the warranty cost for a unit product, the market environment, and the regional difference in consumer demand inevitably lead to fluctuations in the sale price and sales volume of products in different sub-regions In accordance with this analysis, a modeling framework of the sub-region warranty differential pricing strategy is established based on the regional granularity of product use reliability. The proposed use reliability prediction model and the highdimensional optimization model are illustrated
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