Differential Evolution Approach to Promotional Effort Allocation in Segmented Market for Multi-period Promotion Strategies in a Planning Horizon Incorporating Repeat Purchase

Abstract

Promotional efforts play very important role in determining success of a product in the market. These efforts voice product qualities and help it establish relationship with consumers. Decisions pertaining to promotional effort allocation must be taken with enormous care as promotional effort expenditure is essential to produce sales by transforming potential customers from the state of unawareness to that of action. But at the same time product life cycle is small and the promotional resources are limited. So these resources must be used judiciously. In this paper, we examine the problem of optimal allocation of promotional effort resources among distinctive market segments under budgetary and minimum aspiration level constraints where the market is subject to repeat purchasing. The planning horizon is divided into multi time periods and the adoption pattern is studied in each period. The parameters of sales growth repeat purchase model are re-estimated using all the available sales growth data for each segment at the beginning of each time period. The new allocation problem is re-formulated and using the new estimates, promotional allocations are determined for the next period till we reach end of the planning horizon. The non-linear programming problem so formulated is solved using differential evolution which stands as a powerful tool for solving search and optimization problems. A numerical example has been discussed to illustrate the applicability of the approach.