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Brand Switching and Mathematical Programming in Market Expansion

Author

Listed:
  • Philip H. Hartung

    (Montgomery Ward, Chicago)

  • James L. Fisher

    (McKinsey and Company, Inc., London)

Abstract

In a number of industries, product is sold through individual outlets under control of a company through lease or franchise. If these individual outlets are independent, in that sales in one have no influence on another, then the decision to add or subtract an outlet in a marketing area rests solely on investment and cost considerations. If, on the other hand, one outlet has an influence on another in terms of sales, then the decision to expand must take this influence into account. This paper suggests a method for planning expansion systematically and consistently when this influence, which is called market share, is present. The approach taken is that of mathematical programming where the objective function is nonlinear. The solution suggested here is one of iteration which has worked well for problems studied by the authors. A theoretical model, based on brand switching, is validated by experimental evidence and these results are then employed in the development of a long-term planning model.

Suggested Citation

  • Philip H. Hartung & James L. Fisher, 1965. "Brand Switching and Mathematical Programming in Market Expansion," Management Science, INFORMS, vol. 11(10), pages 231-243, August.
    • Handle: RePEc:inm:ormnsc:v:11:y:1965:i:10:p:b231-b243
    DOI: 10.1287/mnsc.11.10.B231
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    Cited by:

    1. Madjid Tavana & Debora Di Caprio & Francisco J. Santos-Arteaga, 2016. "Loyal customer bases as innovation disincentives for duopolistic firms using strategic signaling and Bayesian analysis," Annals of Operations Research, Springer, vol. 244(2), pages 647-676, September.
    2. H-Y Tsao & L Pitt & C Campbell, 2010. "Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1523-1529, October.
    3. Krafft, Manfred & Goetz, Oliver & Mantrala, Murali & Sotgiu, Francesca & Tillmanns, Sebastian, 2015. "The Evolution of Marketing Channel Research Domains and Methodologies: An Integrative Review and Future Directions," Journal of Retailing, Elsevier, vol. 91(4), pages 569-585.
    4. Michael, Steven C., 2003. "First mover advantage through franchising," Journal of Business Venturing, Elsevier, vol. 18(1), pages 61-80, January.
    5. H-Y Tsao & P-C Lin & L Pitt & C Campbell, 2009. "The impact of loyalty and promotion effects on retention rate," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(5), pages 646-651, May.

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