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Optimal Dynamic Advertising Policy for New Products

Author

Listed:
  • Trichy V. Krishnan

    (Department of Marketing, NUS Business School, National University of Singapore, Singapore 117592)

  • Dipak C. Jain

    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

Abstract

Advertising is one of the key marketing tools managers have at their disposal to influence their customers into purchasing a new product. The overall objective of new product advertising is to inform and persuade customers. Drawing up an advertising plan for a new product that is under the influence of diffusion phenomenon is not an easy task. Hence, research in this area is very limited. In our research, we use an empirically proven diffusion demand function that explicitly incorporates the advertising component. Our results suggest that optimal advertising is determined by the advertising effectiveness, discount rate, and the ratio of advertisement to profits. Depending upon the interplay among these factors, the optimal advertising takes decrease-increase, increase-decrease, monotonically increasing or monotonically decreasing shape.

Suggested Citation

  • Trichy V. Krishnan & Dipak C. Jain, 2006. "Optimal Dynamic Advertising Policy for New Products," Management Science, INFORMS, vol. 52(12), pages 1957-1969, December.
    • Handle: RePEc:inm:ormnsc:v:52:y:2006:i:12:p:1957-1969
    DOI: 10.1287/mnsc.1060.0585
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    References listed on IDEAS

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    1. Frank M. Bass & Trichy V. Krishnan & Dipak C. Jain, 1994. "Why the Bass Model Fits without Decision Variables," Marketing Science, INFORMS, vol. 13(3), pages 203-223.
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    Cited by:

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    10. Kato, Ryo & Hoshino, Takahiro, 2021. "Unplanned purchase of new products," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    11. Alicia Barroso & Gerard Llobet, 2011. "Advertising and Consumer Awareness of New, Differentiated Products," Working Papers wp2011_1104, CEMFI.
    12. Helmes, Kurt & Schlosser, Rainer & Weber, Martin, 2013. "Optimal advertising and pricing in a class of general new-product adoption models," European Journal of Operational Research, Elsevier, vol. 229(2), pages 433-443.
    13. Hariharan, Vijay Ganesh & Talukdar, Debabrata & Kwon, Changhyun, 2015. "Optimal targeting of advertisement for new products with multiple consumer segments," International Journal of Research in Marketing, Elsevier, vol. 32(3), pages 263-271.
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