Publication

Dynamic Learning in Markets: Pricing, Advertising, and Information Acquisition

Thomas Alois Weber
2019
Conference paper
Abstract

In the face of demand uncertainty, a monopolist can observe sales as a controlled reaction to its price and advertising so as to improve the choice of this marketing mix in the future. Furthermore, to upgrade its knowledge about demand the firm has the option to invest in external market intelligence and thus to directly acquire relevant information. Using a two-period model we determine the firm's profit-maximizing learning strategy using all three of these levers: price, advertising, and information acquisition. This illustrates the firm's tradeoff of actively managing its consumer base through costly marketing, exploiting expected demand through pricing, and increasing the efficiency of its actions by means of costly outside information. An extension of the model to the case with internal budget constraints on information acquisition is provided, and a numerical example is discussed.

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Ontological neighbourhood
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Marketing communications
Marketing Communications (MC, marcom(s), marcomm(s) or just simply communications) refers to the use of different marketing channels and tools in combination. Marketing communication channels focus on how businesses communicate a message to its desired market, or the market in general. It is also in charge of the internal communications of the organization. Marketing communication tools include advertising, personal selling, direct marketing, sponsorship, communication, public relations, social media, customer journey and promotion.
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Marketing mix modeling (MMM) is statistical analysis such as multivariate regressions on sales and marketing time series data to estimate the impact of various marketing tactics (marketing mix) on sales and then forecast the impact of future sets of tactics. It is often used to optimize advertising mix and promotional tactics with respect to sales revenue or profit. The techniques were developed by econometricians and were first applied to consumer packaged goods, since manufacturers of those goods had access to accurate data on sales and marketing support.
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