Optimal advertising pulsation policies: a dynamic programming approach

This study formulates and solves an advertising pulsation problem for a monopolistic firm using dynamic programming (DP). The firm aims at maximising profit through an optimal allocation of the advertising budget in terms of rectangular pulses over a finite planning horizon. Aggregate sales response...

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Bibliographic Details
Published in:The Journal of the Operational Research Society 2001-11, Vol.52 (11), p.1244-1255
Main Authors: Mesak, H I, Zhang, H
Format: Article
Language:English
Subjects:
Advertising
Advertising expenditures
Advertising rates
Advertising research
Advertising to sales ratios
Applied sciences
Business and Management
Dynamic programming
Exact sciences and technology
Management
Marketing
Mathematical functions
Mathematical models
Mathematical programming
Operational research and scientific management
Operational research. Management science
Operations Research/Decision Theory
optimisation
Optimization
Profit planning
Revenue
Sponsored search
Studies
Theoretical Paper
Theoretical Papers
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Summary:This study formulates and solves an advertising pulsation problem for a monopolistic firm using dynamic programming (DP). The firm aims at maximising profit through an optimal allocation of the advertising budget in terms of rectangular pulses over a finite planning horizon. Aggregate sales response to the advertising effort is assumed to be governed by a modified version of the Vidale-Wolfe model in continuous time proposed by Little. Using a numerical example in which a planning horizon of one year is divided into one, two through ten equal time periods, computing routines are developed to solve 150 DP problems. Computational results show among other findings that the performance yielded by the DP policy dominates the uniform advertising policy (constant spending) for a concave advertising response function and the advertising pulsing policy (turning advertising on and off) for a linear or convex response function.
ISSN:0160-5682
1476-9360
DOI:10.1057/palgrave.jors.2601219