According to operations research, retailers can increase market size and revenues by better understanding the factors that go into a buyer’s decision-making process.
Nikolay Osadchiy, assistant professor of information systems and operations management at Goizueta Business School, says the decision to purchase an item at regular price or wait for a possible markdown involves a multi-step mental process. Consumers weigh factors such as the value of the item, the delay in getting the item, the likelihood of being able to purchase the item, and the magnitude of the price discount.
These behaviors are predictable and, when placed in the right equations can inform retailers — to great affect — on the size and timing of item markdowns. Osadchiy and co-authors Manel Baucells (University of Virginia) and Anton Ovchinnikov (Queen’s University) detail the background knowledge, methods and findings in an upcoming edition of Operations Research.
Osadchiy recently appeared on the Dana Barrett Show to discuss consumer purchasing habits.