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Business analytics: online promotion with gift rewards

Business analytics: online promotion with gift rewards
Business analytics: online promotion with gift rewards
This study analytically examines online promotions with gift rewards based on data from a Chinese tea retailer, Huiliu. Gift rewards benefit Huiliu by improving promotional performance. However, they generate operational problems, especially by increasing the costs of holding gift inventory. To address Huiliu’s concerns about gift rewards, we first conduct an empirical study based on Huiliu’s promotional data to examine the effect of gift rewards on customer purchase behavior. The empirical result suggests that gift rewards induce more repeat customer purchases; however, they do not induce customers to spend more money. This empirical result reveals that the effect of gift rewards on customer purchase behavior leads to Huiliu’s intensifying gift inventory pressure. Based on this empirical finding, we develop a theoretical model that addresses gift inventory management. Because of the difficulty of precisely estimating the distributions of some key random variables (e.g., customer demands), we employ a robust approach to solve this model and provide near-optimal robust solutions. We finally present a case study to illustrate how to improve Huiliu’s gift allocation based on the robust inventory solutions. The numerical results show that the improved gift allocation significantly increases Huiliu’s profits (the average profit increment is 3.58%).
0254-5330
1-16
Yu, Huan
071c97e4-f277-4fdf-a6f8-e3fe25f98769
Shi, Ye
c2ba2719-70ed-4c9d-b2cc-3fc47176bd24
Yu, Yugang
3bb2f1c2-e302-40b0-810b-28f6119b46fd
Liu, Jie
41d72bb6-a177-4906-b4cf-083c4573abd8
Yang, Feng
26488341-0d06-485f-a697-427ca4bfd15e
Wu, Jie
a1eb26b7-930b-4797-9003-516219eba24f
Yu, Huan
071c97e4-f277-4fdf-a6f8-e3fe25f98769
Shi, Ye
c2ba2719-70ed-4c9d-b2cc-3fc47176bd24
Yu, Yugang
3bb2f1c2-e302-40b0-810b-28f6119b46fd
Liu, Jie
41d72bb6-a177-4906-b4cf-083c4573abd8
Yang, Feng
26488341-0d06-485f-a697-427ca4bfd15e
Wu, Jie
a1eb26b7-930b-4797-9003-516219eba24f

Yu, Huan, Shi, Ye, Yu, Yugang, Liu, Jie, Yang, Feng and Wu, Jie (2019) Business analytics: online promotion with gift rewards. Annals of Operations Research, 1-16. (doi:10.1007/s10479-019-03193-3).

Record type: Article

Abstract

This study analytically examines online promotions with gift rewards based on data from a Chinese tea retailer, Huiliu. Gift rewards benefit Huiliu by improving promotional performance. However, they generate operational problems, especially by increasing the costs of holding gift inventory. To address Huiliu’s concerns about gift rewards, we first conduct an empirical study based on Huiliu’s promotional data to examine the effect of gift rewards on customer purchase behavior. The empirical result suggests that gift rewards induce more repeat customer purchases; however, they do not induce customers to spend more money. This empirical result reveals that the effect of gift rewards on customer purchase behavior leads to Huiliu’s intensifying gift inventory pressure. Based on this empirical finding, we develop a theoretical model that addresses gift inventory management. Because of the difficulty of precisely estimating the distributions of some key random variables (e.g., customer demands), we employ a robust approach to solve this model and provide near-optimal robust solutions. We finally present a case study to illustrate how to improve Huiliu’s gift allocation based on the robust inventory solutions. The numerical results show that the improved gift allocation significantly increases Huiliu’s profits (the average profit increment is 3.58%).

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e-pub ahead of print date: 28 March 2019

Identifiers

Local EPrints ID: 433865
URI: https://eprints.soton.ac.uk/id/eprint/433865
ISSN: 0254-5330
PURE UUID: cc87752e-20c0-4053-8041-f50794b9811e

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Date deposited: 05 Sep 2019 16:30
Last modified: 05 Sep 2019 16:30

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Contributors

Author: Huan Yu
Author: Ye Shi
Author: Yugang Yu
Author: Jie Liu
Author: Feng Yang
Author: Jie Wu

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