Concentrated Promotional Efforts and Product Diffusion: A Normative Analysis

Abstract

This paper attempts to derive optimal normative promotion policy for new product diffusion in which the marketer has the option of engaging in a geographically concentrated product promotion policy. Such kind of promotion takes place in rural marketing situations in India, in which a group of consumers is assembled at one place, and “concentrated” promotion is provided to this group at a specific point in time. The model developed is an extension of the traditional product diffusion model (Bass 1969) and takes into account the impact of this marketing action in a finite horizon context. The paper simulates scenarios that vary in terms of the product type, cost of promotion and per-period marketing costs. The numerical analysis reveals that low promotion costs results in larger promotions. In addition, slow moving products require greater amount of promotion than fast moving products. Further, lower per-period costs are associated with longer optimal product diffusion cycles.