Optimal Advertising Research Articles

Management of an advertising campaign based on the model of the enterprise's logistic system

The study is devoted to solving the scientific problem of optimal expansion of the enterprise’s market niche, taking into account potential demand and the formation of an effective advertising campaign. An economic-mathematical model of the enterprise’s production activity has been developed taking into account logistics and market demand. The problem of determining the optimal advertising costs is solved in two formulations: a) the enterprise produces homogeneous goods and the wholesale warehouse can fulfill the retail order for any quantity of goods in the wholesale warehouse; b) the enterprise produces some products in assortment. In this case, a certain minimum stock of products should be available at the wholesale warehouse. The study found that the optimal advertising costs are determined by the value of all the main parameters of the enterprise’s logistics system. This conclusion was obtained as a result of careful model accounting of the structure of the enterprise’s logistics system. All the main links (flows) between the elements of the logistics system were also taken into account. The simulation was performed in such a way that non-physical phenomena (for example, storage overflow, etc.) did not appear at the intermediate stages of modeling. The calculations found that with the planned capacity of 4.1 (units per day), the annual profit will be 3975.5 (units) with an optimal advertising cost of 44.8 (units). The practical significance of the study is that scientific ideas about the relationship of the advertising campaign with the production potential of the enterprise can serve as the basis for more efficient management of the budget process at the enterprise, namely: more informed planning of production volumes and expenses for its advertising campaign

Application of optimal control to the dynamic advertising decisions for supply chain with multiple delays

This paper is concerned with application problem of optimal control to a class of dynamic advertising models with multiple delays. Here, a dynamic model with state and control delays is introduced to describe the impacts of advertising delayed and memory effects on the evolution of brand goodwill. In the decentralized and centralized systems, the optimal advertising strategies of supply chain members are presented by utilizing the nonzero-sum differential game governed by differential equation with multiple delays in state and control variables. Special effort is made to analyse the geometrical shapes of advertising strategy and provide the optimal decision structure of supply chain system. Furthermore, nonzero-sum stochastic differential game is applied to explore the dynamic advertising decision problems of supply chain system with the multiple delays and stochastic cases. Finally, numerical examples are exploited to illustrate the effectiveness of the proposed results.

DEEP-AD: A Multimodal Temporal Video Segmentation Framework for Online Video Advertising

In this paper, we introduce the DEEP-AD framework, a multimodal advertisement insertion system dedicated to online video platforms. The framework is designed from the viewer's perspective, in terms of commercial contextual relevance and degree of intrusiveness. The main contribution of the paper concerns a novel multimodal temporal video segmentation algorithm into scenes/stories, which makes it possible to determine automatically the temporal instants that are the most appropriate for inserting advertisement clips. The proposed algorithm exploits various deep convolutional neural networks, involved at several stages. The video stream is first divided into shots based on a graph partition method. The video shots are then clustered into scenes/story units with the help of an agglomerative clustering methodology taking as input visual, audio and semantic features. Furthermore, in order to facilitate the user's access to multimedia documents a novel thumbnail extraction method is proposed based on both semantic representativeness and visual quality information. Finally, the optimal advertisement insertion points are determined based on the ads temporal distribution, commercial diversity and degree of intrusiveness. The experimental results, carried out on a large dataset of more than 30 videos, taken from the French National Television and US TV series validate the proposed methodology with average accuracy and recognition rates superior to 88%. Moreover, when compared with other state of the art methods, the proposed temporal video segmentation yields gains of more than 6% in precision and recall rates.

Optimal advertising duration for profit maximization

The current research elucidates the advertising scheme of automotive innovation by incorporating the various stages of the product life cycle. The study proposes an empirical model for the automotive industry to evaluate a time-point known as a switch-point or a take-off point at which firms should modify the advertising and sales promotion strategies to boost sales volume. The problem applies a time-series innovation diffusion model wherein adoption rate changes when a product enters a growth stage and then again when the company stops the advertising campaign in the maturity stage. The present paper develops a profit maximization problem, which optimizes the overall advertising duration and advertising take-off point. A numerical illustration is provided using the actual sales data of automobile industries, and sensitivity analysis is further performed to validate the effect of critical parameters on the optimization problem.

An optimal advertising strategy in aesthetic medicine budgets with uncertain income

ABSTRACT Considering advertising efficiency capital investment and overall revenue efficiency, this study explores how to construct the most appropriate advertising distribution of medical cosmetology, which is viewed as the overall research focus. (1) This study explores how the aesthetic medicine industry determines its optimal resource allocation ratio of advertising investment that can create maximum output value under the condition that the advertising budget for subsidiaries is limited and that advertising efficiency is uncertain. (2) The model of this study is based on the concept of dynamic programming, which is used to solve problems in multistage decision-making. Under limited advertising investment by subsidiaries in new media and traditional media advertisements, we aim to increase the number of visitors and high-consumption customers. (3) The contribution of this research is to construct a practical model for the optimal allocation of advertising investment in the aesthetic medicine industry. The research results, including a mathematical model and practical application, can be used as a reference for the aesthetics medicine industry or general companies to determine the best allocation of advertisement cost inputs.

Advertising and Market Structure in the US Mutual Fund Industry

ABSTRACTThis paper empirically investigates the role played by advertising in determining market structures in various segments of the US mutual fund industry. Segments with intermediaries or sophisticated customers exhibit low advertising elasticity of demand, low advertising expenditures, and low market concentration. They also experience further market fragmentation over time. On the contrary, segments which cater to less sophisticated customers without intermediaries exhibit advertising-sensitive demand as well as high advertising expenditures. Those segments exhibit high market concentration and their market structure becomes further concentrated over time. These findings shed light on the impact of consumer characteristics on firms' optimal advertising and resultant market structure.

Optimal advertisement budget allocation and coordination in luxury fashion supply chains with multiple brand-tier products

Advertisement is critical in luxury fashion supply chains. In this paper, we analytically explore the optimal advertisement budget allocation strategy and coordination challenge when there are multiple brand-tier products in the market. In the basic model, we focus our analyses with respect to different risk attitudes that the luxury fashion brand takes and the coordination mechanisms. We show that irrespective of risk attitudes of the luxury fashion brand, the optimal advertisement strategy is a polarized strategy. We derive the coordination mechanisms to overcome the double marginalization effect for each risk attitude case. In the extended model, with the market share considerations, the optimal advertisement strategy is derived and is shown to be no longer polarized in general.

Optimal advertising outsourcing strategy with different effort levels and uncertain demand

This paper studies the issue of advertising outsourcing and production planning for a manufacturer facing asymmetric advertising cost and uncertain market demand. To improve product sales, a manufacturer would hire an advertising agency to provide professional service on product advertising before the production takes place. A contract taking into account both advertising effort level and payment is introduced to incentivize the advertising agency to report the exact cost to the manufacturer. Furthermore, a model with the goal of maximising the manufacturer's net profit is proposed, in which both product demand and payment to the advertising agency are affected by the advertising effort level. Analytical solutions of the optimal strategies including the optimal advertising effort level and the optimal payment to the advertising agency are derived. Optimal retail price and the optimal production quantity are also obtained for the manufacturer in making managerial decisions.

Use of neurometrics to choose optimal advertisement method for omnichannel business

ABSTRACTThe omnichannel business has deeply affected retail practices and promotional strategies. This paper presents an empirical evaluation of omnichannel advertisement channels using neurometric response of the viewers. High precision camera and Galvanic Skin Response sensors were used to record neurometric information of respondents. The response of forty volunteers against a set of cosmetic advertisements was recorded to train a computer for predicting expected neurometric response for an advertisement channel. The recorded neurometric data was further analyzed to develop a set of business rules to measure the effectiveness of any advertisement channel. Later, comparative analysis of various advertisement channels was done.

Entry Deterrence, Coordinating Advertising and Pricing in Markets with Consumption Externalities

Abstract This paper extends the entry deterrence literature by examining coordinating advertising and pricing in markets with consumption externalities using a stochastic success function. Optimal advertising and pricing strategies are analysed when an incumbent firm faces a challenger with a product of equal quality. I show that strategic entry deterrence using advertising is possible and optimal entry deterrence involves strategic pre-commitment to over-investment relative to the non-strategic simultaneous advertising benchmark. I show that when entry deterrence is not possible the incumbent does not possess a first mover advantage and optimal entry accommodation involves strategic investment in advertising with intensified price competition congruent with the non-strategic simultaneous advertising benchmark. The findings suggest that an incumbent’s ability to deter entry through coordinating advertising in a market with products of equal quality is sensitive to the size of the fixed cost of entry that the challenger must incur and the consumption externality parameter.

Optimal advertising and pricing for new green products in the circular economy

In the circular economy era, environmental sustainability is critical, and both green and non-green products with similar functions co-exist in practice. There is little doubt that these two types of products are competing and may substitute one another even though one is more environmental friendly than the other. In this paper, we build analytical models to explore the optimal advertising and pricing decisions for a green product in the presence of a non-green product substitute. We investigate both simultaneous and sequential pricing strategies under which there are three possible pricing scenarios, namely: 1) both prices of green and non-green products are determined simultaneously (Strategy IP), 2) the green product's price is decided first and then the non-green product's price is determined (Strategy GL), and 3) the non-green product's price is decided first and then the green product's price is determined (Strategy NL). We find that the sequential pricing strategy is more profitable than the simultaneous pricing strategy for both green and non-green supply chains. It is interesting to prove the existence of “second-mover advantage” in the pricing game. Moreover, we identify that if the green supply chain uses Strategy NL, it could achieve a better performance in profit and minimize the corresponding environmental impact. If the green supply chain is truly socially responsible, it should design a product with low substitutability, so that the environmental impact can be enhanced. Furthermore, our numerical results indicate that Strategy IP never performs the best in terms of consumer surplus and social welfare when the product substitution level is sufficiently high. Findings of this paper contribute to the literature on cleaner production systems in the circular economy era.

Feedback Equilibrium for Dynamic Competitive and Cooperative Advertising

This paper not only studies the competitive advertising between the manufacturer in direct channel and the upstream retailer which is in distribution channel, but also investigates the cooperative advertising between the upstream manufacturer and the downstream retailer in distribution channel in the case that the downstream retailer faces a competition from direct channel. Through the establishment of Nash game-theoretic model between the manufacturer in direct channel and the upstream retailer which is in distribution channel, the optimal advertising decisions of distribution channel and the downstream retailer are obtained. On the other hand, in order to obtain the optimal advertising strategies of members in distribution channel, Stackelberg game-theoretic models are established in this study. In this paper, we find that when there is a manufacturer in direct channel competing with distribution channel, the advertising participation rate from the upstream manufacturer to the downstream retailer is higher than that in no competitions. Under asymmetric and symmetric competition, the profit of the upstream retailer in distribution channel is always higher than that of the manufacturer in direct channel.

Optimal advertising strategies in a sports licensing contract

Optimal advertising strategies in a sports licensing contract

Co-op advertising in a dynamic supply chain when supply is disrupted

This paper studies a dynamic cooperative advertising under supply disruptions. Cooperative (Co-op) advertising is a widely used marketing tool which affects advertising effort policy and advertising subsidy policy throughout the supply chain. First, the manufacturer announces the participation rate of cooperative advertising which specifies the percentage of the retailer’s advertising expenditure that it will provide, then the retailer determines its advertising effort policy. We model this supply chain problem as a Stackelberg differential game, and provide the optimal advertising effort policy and advertising subsidy policy for the manufacturer and the retailer. Based on a Co-op advertising scenarios, we consider the supply disruption. When a supply disruption occurs, the initial cooperative advertising policy need to be revised. To solve this problem, the change of margin of manufacturer and retailer and market scale of product caused by supply disruption must be explicitly considered. This paper discusses how to model the supply disruptions and their impacts, and how to design cooperative advertising scheme under supply disruption.

New Optimal-Control-Based Advertising Strategies and Coordination of a Supply Chain With Differentiated Products Under Consignment Contract

With the aid of optimal control theory, the cooperative advertising problem is discussed for a supply chain under consignment contract in a competitive environment. Consider the case that the market demand of products is affected by advertising effort and goodwill, both the optimal advertising strategies and advertising participation rate in the centralized and decentralized settings are given. The state-dependent contract with the slotting fees is introduced to coordinate the considered supply chain. Our results demonstrate that the participation rate is closely related to the marginal profits of channel members and the competition intensity between products. Besides, the state-dependent contract with the slotting fees can effectively coordinate the supply chain when the contract parameters satisfy certain conditions. Finally, the sensitivity analysis of the competition intensity between products is conducted by using some simulations.

A manufacturer-retailers dynamic cooperative advertising with retail competition

This work deals with the cooperative advertising in a manufacturer retailers supply chain. It considers the manufacturer as the Stackelberg leader and the retailers as the followers playing a Nash game with each other. Using differential game theory it obtains a time consistent feedback Stackelberg equilibrium for the optimal advertising strategies and payoffs for a situation where retail advertising is subsidised and where it is not subsidised. The work shows that while the manufacturer's advertising effort reduces with subsidy, the retailers' advertising efforts and product awareness increase. These consequently lead to increase in all the players' payoffs. While a fair player would increase his advertising effort with increasing payoff, the others reduce their efforts. Further a retailer's advertising effort should be subsidised only if the rate of increase of the manufacturer's payoff through that retailer's margin to the manufacturer is twice greater than the rate of increase of that retailer's payoff.

A randomized adaptive neighbor discovery for wireless networks with multi-packet reception capability

Neighbor discovery is a first step in the initialization of wireless networks in large-scale ad hoc networks. In this paper, we propose a randomized neighbor discovery scheme for wireless networks with a multi-packet reception (MPR) capability. We let the nodes to have different advertisement probabilities. The node gradually adjusts its probability according to its operation phases: greedy or slow-start. In the greedy phase, the node advertises aggressively while it does moderately in the slow-start phase. Initial phase and advertisement probability are determined randomly. Then, the nodes change the probability adaptively according to advertisements the reception state from the other nodes. In order to decide the reception state precisely, the exact number of nodes in the network is necessary. To make our proposed scheme work in case of no prior knowledge of the population, we propose a population estimation method based on a maximum likelihood estimation. We evaluate our proposed scheme through numerical analysis and simulation. Through the numerical analysis, we show that the discovery completion time is lower bounded in Θ(Nk) and upper bounded in Θ(NlnNk) when there exists N nodes with MPR-k capability. The bounds are the same as those of previous studies that propose static optimal advertisement probability. Through the simulation, we evaluate that our adaptive scheme outperforms in terms of discovery completion time, advertisement efficiency, and wasted time slot ratio than a scheme with static advertisement probability when the population of the network is unknown.

Informative advertising in a distribution channel

In this paper, we study how channel structure (decentralized vs centralized) and specified allocation of product advertising authority affect final advertising content and profits when consumers face uncertainty about both product match and retail price, and must incur a sunk cost to visit the retail store before making a purchase. We develop a game-theoretic framework in which a manufacturer and a retailer are defined as leader and follower, respectively, to model the strategic interactions and the optimal advertising and pricing decisions of channel members. In this context, we find that channel decentralization may lead to greater advertising content. Moreover, we find that if the manufacturer has product advertising authority additional to the retailer’s product advertising authority, then both the product advertising provision and the price advertising provision can be greater. This additional product advertising authority can lead to the manufacturer’s higher but the retailer’s lower profit with increased overall channel profits. However, if the manufacturer has exclusive product advertising authority, as compared to the case in which both channel members can advertise product, the manufacturer’s exclusive product advertising authority can lead to a decreased product advertising provision as well as a decreased price advertising provision; and it may even hurt the manufacturer while benefiting the retailer. We also find that a shift of exclusive product advertising authority from the retailer to the manufacturer leads to a product advertising provision that is such that more consumers will visit the store and purchase the product, which benefits the overall channel for a large parameter range.

How do loyalty programs affect goodwill? An optimal control approach

This paper examines the long-term impact of loyalty programs on a company’s profit and reputation among customers, and with different durations of product use. We analyze how the launch of loyalty programs may change the profitability of optimal advertising activities. The basis of this study is a modified goodwill model where the market is segmented according to usage experience. The main novelty is the role of loyalty programs and consumer recommendations in the creation of product goodwill, and also their influence on optimal advertising. The dynamics of goodwill are described by a partial differential equation. The firm maximizes the sum of discounted profits by choosing a different advertising campaign for each market segment. For a high-quality product, we observe that there is a trade off between the loyalty program and optimal advertising strategies. For a low-quality product, the loyalty program causes more profitable companies to invest heavily in additional advertising efforts.

Optimal impulsive control for advertising strategy problems based on a gradient-based PSO algorithm

This paper considers an optimal advertising strategy problem. This is an important problem in marketing investment for new products in a free market. The main contributions of this paper are as follows. First, the problem is formulated as an optimal control problem of switched impulsive systems with the state inequality constraints, which is different from the existing nonlinear system models. As the complexity of such constraints and the switching instants are unknown, it is difficult to solve this problem by using conventional optimization techniques. To overcome this difficulty, by applying the penalty function, all the state inequality constraints are first written as non-differentiable penalty terms and imposed into the cost function. Then, the penalty terms are smoothed by using a novel smooth function, leading to a smooth optimal control problem with no state inequality constraints, and an improved gradient-based particle swarm optimization (PSO) algorithm is proposed for solving this problem. Error analysis results show that if the adjustable parameter is sufficiently small, the solution of the smooth optimal control problem is approximately equal to the original problem. Finally, a switched impulsive system for beer sales is established to illustrate the effectiveness of the developed algorithm.