Journal of Marketing Research and Case Studies 6
Model
In our study we analyze the sales pattern and profitability of launching a technological product in a monopolistic market environment using ABM. The company implements different marketing strategies which consist of different promotion and price levels, different quality characteristics of the product and different number of targeted opinion leaders. It has the power to change the quality characteristic and price of the product, as well as the promotion and opinion leader strategy and to monitor WOM effect on profits. We take into account three of the 4Ps, product (quality), price and promotion in the model and ignore the place effect. The market environment is the place where consumers and products meet. There are N heterogeneous consumers in the market and they are connected through a social network. In the consumer population there are M opinion leaders. Opinion leaders have a larger effect on the consumers compared to other people. They are randomly distributed among the population. In other words consumers have the ability to act according to their own preferences and to influence each others’ purchasing decisions. There are T discrete time steps at each experiment. At each time step the model assess whether an individual already purchased the product or not. If the individual has purchased the product, she uses the product until the last time step and does not make a purchasing decision in consecutive time steps. Otherwise the individual revises her buying decision in every time step. At the beginning of each replication, the population is initialized and the company launches its product into the market. As the consumer population is created, randomly distributed parameters are assigned to every individual for their product preferences values. Each individual also has sensitivity parameters for price, promotion and WOM which are randomly distributed. These sensitivity parameters show how receptive a consumer is to external factors. Some consumers’ quality sensitivity may out weight their price sensitivity, in other words low prices may not persuade some consumers to purchase low quality products (Schwaiger & Stahmer 2003). After the consumer population is created, the differences between individual consumers’ preferences are calculated. We set preferences as the indicator of distance between individuals assuming that individuals having similar product preferences are more likely to have similar life standards and are more likely to encounter with each other (Carley 2003). The absolute value of the differences between individuals’ preference values are used to determine whether they are connected to one another. Individuals that have a distance lower than a predetermined threshold are assumed to be connected. We assume that, consumers connected to each other have the ability to influence each other and an individual is more likely to get influenced by a person who has similar product preferences. In this study we only take quality as the product decision and we set two technological attributes for the specified product. The product has two different attributes. For the first attribute, consumers may prefer any value depending on their needs. Size can be n example for this kind of attribute. The second attribute is “the more, the better” type of attribute, which means that consumers are always willing to get higher levels of it, such as resolution of the screen. Price is the amount the consumer pay in exchange of the product. Even though it may seem that lower prices will attract larger number of consumers, with the adequate promotion strategies, the motivation and