HAL Id: hal-01122703
https://hal.archives-ouvertes.fr/hal-01122703
Preprint submitted on 6 Mar 2015
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Price optimisation strategy
Jérôme Baray, Martine Pelé
To cite this version:
Jérôme Baray, Martine Pelé. Price optimisation strategy. 2009. �hal-01122703�
PRICE OPTIMISATION STRATEGY Jérôme Baray and Martine Pelé
Jérôme Baray is Professor at the Paris-East University (UPEC), Researcher at Lab’Urba Address : 11 avenue du Général de Gaulle, 94010 Créteil, France
Email: jerome-baray@orange.fr – Tel: +33 (0)6 85 83 05 12
Martine Pelé is Professor at the University of Paris 2 Pantheon Assas, Researcher at Largepa Address : 13 avenue Bosquet, 75007 Paris
Email: Pele.martine@wanadoo.fr - Tel: +33 (0)1 53 59 44 60
An actual case: the price of laptop micro-computers sold on the Internet
We have set out the number of laptop micro-computers sold on the Internet by price band: this data has been gathered from a website that compares the prices of all the resellers of computer hardware on the web in France (www.i-comparateur.com). The database has 1201 models of laptop computer from 200 to 4712 euros.
It will be noticed that the supply is not in practice evenly spread and that there is strong competitive pressure corresponding to the “psychological” prices in the ranges from 590 to 599 euros, 690 to 699 euros and 790 to 799 euros. By contrast, in price range from 855 to 860 euros there is no supply at all.
The equation in Graph 1 represents the level of supply modelled on a 6 degree polynomial curve, the first part of which has the appearance of a Gaussian curve: the supply points below the curve represent low pressure from the competition, whereas the points above the curve indicate the opposite.
But what price should one adopt if the overriding aim is to avoid competition in this field (avoidance strategy)? In this case, the following constraint must be respected:
Max [ Min
i | p – P
Ci| ] & Max [ Min
j| p – P
Rj| ]
By minimising the intra-class variance and maximising the inter-class variance, an ascending hierarchical order gives us an optimised spread in 3 price ranges whose centres are 702.94, 1337.64 and 2350.71 euros taken from 806, 316 and 79 individuals respectively.
If one represents the number of computers on offer as a function of a moveable price range (Graph 2), one sees that the supply is weak at certain intervals and in particular in the [805;
860 euros] and [1400; 1465] brackets, which are well outside the classes previously determined.
Thus it is possible to determine the optimal prices between these classes, being the prices that are furthest removed from the competition and that correspond to the weakest competitive pressure.
P1, to be chosen from the [805; 860 euros] range and P2 from the [1400; 1465] range are thus
the optimal prices where the competition is clearly weakest in terms of the supply of models
of laptop computers. These values should correspond to the prices to be set if the specific
intention is to launch two new models of computer in these rare price windows. The
underlying hypothesis is that demand does not vary suddenly as a function of the price level.
This one-dimensional price optimisation, based solely on studying the spread of supply, takes no account of the different characteristics of the products on offer. This analysis might be useful at the pre-design phase.
In the usual case, where good information is available on the products offered by the competition, it will be possible to form clusters following a similar principle, by the prior factorial analysis of the database containing descriptions of all the products in terms of price, product features, and even distribution and promotion channels.
Graph 1
Graph 2
y = 5E-13x6- 6E-10x5+ 3E-07x4- 6E-05x3+ 0,0055x2- 0,0871x + 0,7191 R² = 0,4556
0 2 4 6 8 10 12 14 16 18 20 22 24 26
200-205 255-260 310-315 365-370 420-425 475-480 530-535 585-590 640-645 695-700 750-755 805-810 860-865 915-920 970-975 1025-1030 1080-1085 1135-1140 1190-1195 1245-1250 1300-1305 1355-1360 1410-1415 1465-1470 1520-1525 1575-1580 1630-1635 1685-1690 1740-1745 1795-1800 1850-1855 1905-1910 1960-1965 2015-2020 2070-2075 2125-2130 2180-2185
Number of models
Price Range
Number of models of laptop computers
0 20 40 60 80 100 120
200-255 255-310 310-365 365-420 420-475 475-530 530-585 585-640 640-695 695-750 750-805 805-860 860-915 915-970 970-1025 1025-1080 1080-1135 1135-1190 1190-1245 1245-1300 1300-1355 1355-1410 1410-1465 1465-1520 1520-1575 1575-1630 1630-1685 1685-1740 1740-1795 1795-1850 1850-1905 1905-1960 1960-2015 2015-2070 2070-2125 2125-2180
Number of Laptop Computers
Price Range
