A Model of Product Line Marketing

Firms offer a variety of products to meet different customer needs. In many horizontally differentiated markets, prices are stable, and firms make infrequent adjustments to their product lines. Although prior research focused on product line design, we investigate how firms should allocate their marketing effort when their product lines are fixed. We propose a simple model to analyze product line marketing. Our model exhibits a flagship product effect in which the firm’s optimal marketing effort is concentrated, provided that the ratio between consumer tastes dispersion and the convexity of the cost of marketing effort is below a threshold. The flagship product is selected according to a marketing effort allocation index that measures the trade-off between a product’s markup and its potential market share. This result is robust with or without competition and whether prices are exogenous or endogenous. Firms often experience shocks to their marketing cost because of technological improvement or externalities. If a monopolist’s cost of marketing effort declines, she should place more emphasis on a low-utility, high-markup product. Conversely, if the cost increases, the monopolist may find it beneficial to focus her marketing effort on a high-utility, low-markup product. When multiproduct firms compete against each other, we show that if the opponent’s cost of marketing effort decreases, there can be a spillover effect, in which the firm benefits from the opponent’s cost reduction, thereby leading to a win-win situation. This paper was accepted by Dmitri Kuksov, marketing.

Optimization of product line considering compatibility and reliability via discrete imperialist competitive algorithm

In the era of mass customization, designing optimal products is one of the most critical decision-making for a company to stay competitive. More and more customers like customized products, which will bring challenges to the product line design and the production. If a company adopts consumers' favorite levels, this may lead to lower product reliability, or incompatibility among the components that make up the product. Moreover, it is worth outsourcing certain attribute levels so as to reduce production cost, but customers may dislike these levels because of their delivery delay. If managers consider the compatibility issue, the quality issue, outsource determination, and the delivery due date in the product design and production stages, it will avoid unreasonable product configuration and many unnecessary expenses, thereby bringing benefits to the company. To solve this complicated problem, we establish a nonlinear programming model to maximize a metric about profit, termed as Per-capita-contribution Margin considering Reliability Penalty (PMRP). Since the integrated product line design and production problem is NP-hard, we propose an improved Discrete Imperialist Competitive Algorithm (DICA) that can find a most powerful imperialist (i.e., solution) by the competition among all countries in the world. The proposed DICA is compared with genetic algorithm (GA) and simulated annealing (SA) through extensive numerical experiment, and the results show that DICA has more attractive performance than GA and SA.

A revised imperialist competition algorithm for cellular manufacturing optimization based on product line design

<p style='text-indent:20px;'>Due to the fierce market competition, enterprises try to satisfy customers' requirements for personalized products in order to maximize profit or market share of their products. This not only needs to determine the product variants through product line design, but also needs to pay attention to resource allocation in the manufacturing process. This paper proposes a cellular manufacturing optimization model that considers the market and production. If the company excessively pursues the satisfaction of customers' personalized needs, the manufacturing time and cost may increase accordingly. Of course, with the restriction of production capacity in manufacturing cells and the expectation of reducing cost, managers cannot design attributes' levels of a product line casually, which may result in its unstable marketing share and profit. Therefore, the product demand influenced by customers' preferences could be a key factor to link market and production. The objective of propose model is to maximize product profit which consists of revenue and miscellaneous costs (material, processing, transportation, final assembly and fixed costs). A revised imperialist competitive algorithm (RICA) is developed to optimize the discrete problem. Extensive numerical experiments and t-test are carried out to verify the effect of this method. The results demonstrate the proficiency of RICA over another imperialist competitive algorithm based method and genetic algorithm in terms of solution quality.</p>

The optimal product-line design and incentive mechanism in a supply chain with customer environmental awareness

<p style='text-indent:20px;'>Due to the increasing awareness of sustainable development, the manufacturer's product-line design gets wide attention. Nowadays, the traditional manufacturer that produces non-green products is considering whether to introduce upgraded green products. This paper studies the manufacturer's optimal product-line design considering the quality difference between non-green and green products. Besides, our model also investigates the difference in unit production cost, green research and development (R&amp;D) investment, and market segmentation. The results show that, from the manufacturer's perspective, producing green products is a better choice when non-green products are of low quality. In addition, the retailer is always inclined to sell green products. Further, the consumers' preference for non-green and green products is divided. And the consumer surplus under different product-line designs is analysed. Finally, two contracts are proposed and compared to encourage the manufacturer to produce green products.</p>