Optimal pricing considering customer categories: Case on car rental industries

Segmentation of the customer provides an opportunity to offer more than one class with the different price. However, the most occurring problem is the loss of demand for lower class due to its high demand but limited capacity, while the utility of the higher class is low due to its high price. Thus, setting the right price becomes critical. This paper proposed optimal pricing models considering the customer segments. Car rental business is used as a case study. The capacity of car rental business is dynamic since the number of cars available might dynamically change due to the dynamic return time of the customers. Two scenarios are proposed, without substitution and with substitution. Since the models are non-linear programming with constraints, KKT procedure is applied to get the optimal solution. Results from the case study show that the proposed model enables to increase revenue significantly. Furthermore, substitution scenario has the opportunity to obtain higher revenue.