Time-sensitive markdown strategies for perishable products based on dynamic quality evaluation

Abstract

Purpose This study aims to provide a time- and price-sensitive market strategy for merchants to handle the markdown price strategy. The market demand for perishable products is usually price – and quality (freshness) – sensitive. The proper handling of markdown-price strategies can help merchants enhance competitiveness and maximize operational performance. Design/methodology/approach A markdown strategy consisting of price and markdown time was developed to explore the properties of market strategies based on the dynamic quality evaluation. The strategy considers multiple price discounts and multiple markdown times. The optimal price decisions in each stage and the optimal markdown times were derived during the selling season. Findings The results showed the following. A retailer always raises the initial price if it wants to adopt multiple price-markdown strategies. A high initial price may lead to a high inventory at the early stage and bring the next price reduction in advance. Large price discounts can be used to reduce the inventory later. The higher the previous price, the shorter the interval between the next price reduction. The markdown strategies showed that the regular discount as a new business model is not the best pricing model for perishable products. A time- and price-sensitive strategy, however, can increase operational performance and provide new insights for perishable products. Originality/value The results showed the following. A retailer always raises the initial price if it wants to adopt multiple price-markdown strategies. A high initial price may lead to a high inventory at the early stage and bring the next price reduction in advance. Large price discounts can be used to reduce the inventory later. The higher the previous price, the shorter the interval between the next price reduction. The markdown strategies showed that the regular discount as a new business model is not the best pricing model for perishable products. A time- and price-sensitive strategy, however, can increase operational performance and provide new insights for perishable products.