MODELING AN EFFECTIVE STRATEGY OF ADVERTISING INVESTMENTS OF FIRM IN THE COMPETITIVE MARKET
In this article, a dynamic model of the company's sales dependence on advertising costs is constructed. In a competitive market, advertising is not only a means of increasing demand, but also a competition tool at a level with the price. Advertising allows you to increase sales, but the dependence of increasing demand from increased advertising costs is not linear. If you increase your advertising costs after a certain value, their efficiency will decrease. This model takes into account the dependence of advertising efficiency on the change in the market share of advertising costs of the firm. It is shown that the complexity of capturing a new audience will grow geometrically, and therefore the efficiency of advertising will decrease geometrically. Together with the saturation of advertising, this is reflected in the parameter . Advertising does not work instantly, since its inception, the information is accumulated in the minds of people with each meeting with advertising and reaches the peak after a certain time. If the ads become smaller, then people will forget it more quickly than they will be reminded of it, and the peak of their knowledge of the product will fall. When ads appear to people, it takes some time until their knowledge of the product reaches a peak above which they will not be able to assimilate advertising, because they will forget its details at the same speed. As a rule, this requires about two weeks of advertising. The second manifestation of the delay is related to knowledge of the product as a whole. This requires a relatively long period of time. The model reflects the effect of delayed ad exposure, which is expressed in the so-called “inertial sales”. They can form the bulk of the sales, due to advertising. That increases the importance of promotional investments in the long run, so that real-time advertising may not pay off itself, but eventually turns into profit. In the model, the delay associated with knowledge of the product as a whole is taken on average about a year. So it takes into account seasonality of sales volumes. And given the dynamics of market change over the past period, their corresponding change is taken into account. In the model, “inertial sales” are calculated in proportion to the parts from the required time, where changes take place. General sales consist of “inertial sales” and those are caused by short-term advertising influence.
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