Discount Pricing Strategy For Specific Quantities: A Case Study Discount Pricing Policy Of Innisfree Company

Abstract

Quantity discount strategy is one of the most practical method for business development in almost companies or organization. The useful strategy helps the business increase sales, attract more customers and result in earning higher profit level. This paper will concentrate on business development strategies of Innisfree cosmetic company. A realistic discount policy has been investigated under Stackelberg game theory model, which an inverse process will be applied. The model also takes into account the price elasticity of demand so as to establish an all-unit quantity discount policy with the best reaction of buyer. Moreover, an extended part in comparison with the key reference is the utility of specific scenarios of Innisfree company. Furthermore, the analysis will also concentrate on how the company deal with the problem of different product’s price elasticities of demand. In other words, the study will examine what is company’s reaction with the fluctuation of customer’s sensitivity of price. On the other hand, the model will be validated under Mathematica program, which is an easy, helpful and practical application for calculating complicated algorithms. This program actually convenient for the non-linear model of this thesis. The final result will illustrate the optimal percentage of discount price as well as a quantity breakpoint where decide whether the discount is applied. Put another way, if buyer order quantity is equal or greater than the breakpoint, her price for purchasing is decrease by a specific rate, otherwise, she has to purchase products at original price.