Interacting Advertising and Production Strategies — A Model Approach on Customers’ Communication Networks
In this paper we describe a simulation approach to explore different advertising and production strategies in a heterogeneous consumer market. The main focus is to model the dynamics of interacting marketing and production strategies. Such models are needed to find the right tradeoff between two general main targets: adopting the product to customer needs and/or communicate the products’ features to the market. One essential key factor for a successful product launch is to set up the right product profile, which fulfills the market needs or respectively the needs of the targeted segment. The development process of new innovative products is quite complex and cost-intensive and due a potentially strong competition in most high- tech markets, the companies are forced to launch new products regularly to fulfill the steadily increasing needs of the customers. The model approach presented in this study can be used to determine the optimal product release cycles and to define suitable advertising claims to succeed in highly competitive markets. One considered advertising channel effects all consumers at the same time representing traditional large-area advertising instruments like broadcasting or print media, and a second represents the dispersion of post-purchase information in the customers’ social circle - so-called word-of-mouth advertising. Here a model of an artificial consumer market has been used to provide an experimental environment for the simulation and optimization task - modelling typical stylized facts of software business. So the stylized facts are modeled using a hybrid approach of combining a continuous process described by an ordinary differential equation with discrete update processes of cellular automata and further network structures like ‘random‘ and ‘scale-free’-networks. The stability of the model is shown by comparing different market scenarios with different communication structures. Additionally the gap between the products features and the advertising claim has been varied to figure out the influence of the resulting dissatisfaction to sales and profit of the companies. It is shown that some exaggeration generates a higher outcome, but due to the word-of-mouth effects too much exaggeration destroys the market at all.
KeywordsCellular Automaton Cellular Automaton Stylize Fact Early Adopter Neighborhood Function
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