Optimal advertising control policy for a new product in segmented market

Abstract

Market segmentation is the foundation on which all other marketing actions can be based. It requires a major commitment by management to customeroriented planning, research, implementation and control. The overall objective of using a market segmentation strategy is to improve company's competitive position and better serve the needs of customers. In this paper, we use the concept of market segmentation in diffusion model for advertising a new product considering the external as well as internal infl uences and study the optimal advertising effectiveness rate in a segmented market. First, we discuss the evolution of sales dynamics in the segmented market under the assumption that the fi rm advertises in each segment independently. Further case of a single advertising channel, which reaches several segments with fi xed spectrum, is also discussed. Such problems have not been discussed before. The optimal control theory is applied to study and solve both classes of problems.

Optimal Promotional Effort Policy in Innovation Diffusion Model Incorporating Dynamic Market Size in Segment Specific Market

“…The adoption rate hi(t) can be represented either as a function of time or as a function of the number of previous adopters. Since, the latter approach is used most widely in literature as in (Jha et al, 2009), it is the one applied here. Now, Eq.…”

“…Bass et al (1994) gave the Generalized Bass model, which included both price and advertising strategies. Jha et al (2009) considered diffusion models for products that are new to the market and formulated the optimal strategies for effectively publicizing the product in a partitioned market. They further analysed the sales of a product in a segmented market under the effect of two different ways of advertising.…”

Optimal Control Promotional Policy for a New Product Incorporating Repeat Purchase in Segmented Market: A Control Theoretic Approach

“…Bass et al [17] included both price and advertising in their generalized Bass model. Jha et al [18] used the concept of market segmentation in diffusion model for advertising a new product and studied the optimal advertising effectiveness rate in a segmented market. They discussed the evolution of sales dynamics in the segmented market under two cases.…”

“…Firstly, they assumed that the firm advertises in each segment independently, and further they took the case of a single advertising channel, which reaches several segments with a fixed spectrum. Manik et al [19] amalgamated the two problems formulated by Jha et al [18] and formulated an optimal control problem where they studied the effect of differentiated promotional effort and mass promotional effort on evolution of sales rate for each segment. They obtained the optimal promotional effort policy for the proposed model.…”

Optimal double control problem for a PDE model of goodwill dynamics

“…In recent years, this type of model has been employed in marketing science because researchers have recognized the increasing importance of market segmentation. It has been emphasized that market segmentation strategies improve a company's competitive position and allow better serving the needs of the customers (see [21]). Moreover, marketing tools, such as advertising, that take into account the specificity of the target group in a particular market segment are more efficient and may also increase the enterprise's profits (see [27]).…”