Title: Optimal advertising and pricing policies of successive generations of product in segmented market

Authors: Yogender Singh; Kuldeep Chaudhary; P.C. Jha

Addresses: Department of Operational Research, University of Delhi, Delhi-110007, India ' Department of Operational Research, University of Delhi, Delhi-110007, India ' Department of Operational Research, University of Delhi, Delhi-110007, India

Abstract: Multiple generations of many durable products serves the market simultaneously. When new products are introduced in generations of product, successive generations have substitution effect on the earlier generations. In this paper, we use the concept of market segmentation in diffusion model for generation product. Different advertising and pricing strategies for two generation product are considered, and the problem is formulated as an optimal control problem. The impact of technological substitution in the market on the optimal advertising and pricing policy is characterised. First, we discuss the evolution of sales dynamics under the assumption that the firm advertises in each segment independently. Further case of a single advertising channel, which reaches several segments with fixed spectrum, is also discussed. The optimal control is applied to study and solve the proposed problem. Theoretical results of two successive generation product are discussed. Differential evolution approach used to solve numerical illustration.

Keywords: market segmentation; substitution effect; advertising policies; pricing policies; optimal control; differential evolution; product generations; segmented markets; diffusion modelling; sales dynamics.

DOI: 10.1504/IJCISTUDIES.2013.055218

International Journal of Computational Intelligence Studies, 2013 Vol.2 No.2, pp.113 - 132

Available online: 23 Jul 2013 *

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