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Abstract
A firm's market changes under the impact of the firm's advertising. Feedback information on the market response allows the firm to learn about such changes and to adapt its subsequent media decisions accordingly. This paper presents an adaptive media model (ADAPT) that utilizes feedback information to revise certain parameters in a media decision model. Simulation experiments conducted with the ADAPT model demonstrate how different types of feedback information affect the media decisions and thereby the expected net profit contributions from sales. It is shown how the economic value of feedback information depends on the characteristics of the firm's market and also on the revision rules applied for updating the parameters. The value of the information may actually be negative if it is not used "intelligently".