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Optimal promotion planning for a product launch in the presence of word-of-mouth

Saeide Bigdellou, Shirin Aslani and Mohammad Modarres

Journal of Retailing and Consumer Services, 2022, vol. 64, issue C

Abstract: Marketing managers concern that Word-of-Mouth (WOM) can affect the efficiency of sales promotion policy. Sales promotion might also amplify the strength of WOM which further complicates decision-making. In this study, we deploy an agent-based simulation optimization framework to find an efficient sales promotion plan in the presence of WOM for launching re-purchasable products. In this model, consumers' purchase decisions are influenced by price history, availability and satisfaction of the consumers, and positive/negative WOM. We show that taking WOM on board while determining the promotion plan can significantly increase the net present value. However, amplifying WOM might damage the firm's profit for some product categories.

Keywords: Sales promotion optimization; Word-of -mouth; Agent-based modeling and simulation (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joreco:v:64:y:2022:i:c:s0969698921003878

DOI: 10.1016/j.jretconser.2021.102821

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