Models of a Consumer Product Market

Abstract

Aggregate models of the United Kingdom razor blade market are discussed. During one prolonged period when the market was dominated by two major brands, approximately equivalent in terms of quality, price and distribution, a model based on advertising expenditures alone was remarkably accurate at predicting short-term movements of a brand's market share in periods of both growth and decline. An optimum decay rate of advertising effectiveness was identified. The value of consumer promotions could be estimated from the deviations they produced from the model. To cover longer periods and to encompass brands of widely differing qualities and prices a more complex model was necessary. This has been successful in following long-term trends of market shares of all brands and has contributed towards understanding the market structure. It has shed light on the value of a multi-brand policy and has enabled a retrospective evaluation to be made of the effect of a period of production capacity limitation on market share growth.