Optimal Duration of Promotion for Durable Technology Product in a Segmented Market

ABSTRACT

Firms develop segment driven promotional mix to target its potential customers selectively. As the marginal revenues from promotion decreases with time, it is important to determine the optimal stopping time of a promotional activity. In the literature, the studies carried in this domain do not consider market segmentation and assume a uniform promotional mix. In this study, alternative decision models are developed to determine the duration of promotion for a durable technology product applicable to a segmented market. A case study is discussed to validate the proposed models and to illustrate the solution methodology based on a differential evolution algorithm.

KEYWORDS:

• innovation diffusion model,
• profit optimization model,
• promotion duration,
• promotional effort control model,
• segmentation