A game theory approach to selecting marketing-mix strategies

Abstract

PurposeAdopting efficient marketing strategies is a challenging task in a competitive market place involving complex marketing planning, techniques and mechanisms to identify the best course of action under these circumstances and finding optimal solutions or stable outcomes. Decisions and strategies of competitors in the market influence the selection of the appropriate marketing strategy. The main purpose of this paper is to develop a mathematical methodology based on the game theory approach for planning optimal marketing-mix strategies in dynamic competitive markets, taking into account strategic foresight and interaction effects.Design/methodology/approachThe game theory approach, as a decision-making tool in conflict situations, is suggested for planning and adopting optimal marketing strategy. The main intellectual attraction of the game theory is essentially a question of how to act in gaming situations against highly rational opponents A kind of static, finite and non-cooperative game analytics approach has been developed for this issue, and the proposed model has been implemented to design optimal marketing strategies for two top brands of the automotive parts market in Iran.FindingsThe findings of this study show that the optimal marketing-mix strategy for brand A is pricing and for brand B is the product strategy.Practical implicationsGame theory and the Nash equilibrium model can provide a practical approach to find and adopt the right strategy, know competitors' movements and strategies and get more profit.Originality/valueThe integration of the game theory approach into the marketing mix framework has been adopted as a generalized model for marketing strategy planning and analysis as well as to resolve some shortcomings of the marketing mix framework. The Nash equilibrium model has been used to analyze the results. The incorporation of game theory into marketing models has the potential to enrich the scope of marketing modeling.