The Competitive Marketing Simulator— A New Management Tool

For a guide to the literature, the reader should refer to Buzzell Robert , A Basic Bibliography on Mathematical Models in Marketing (Chicago: American Marketing Association, 1962). Some of the listed articles have found their way into the following edited collections: Bass Frank M. , Mathematical Methods and Models in Marketing (Homewood, Ill.: Richard D. Irwin, Inc., 1961); Frank Ronald , Quantitative Techniques in Marketing (Homewood, Ill.: Richard D. Irwin, Inc., 1962); and Alderson Wroe Shapiro Stanley , Marketing and the Computer (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1962). See also my article, “The Use of Mathematical Models in Marketing,” Journal of Marketing, October 1963.

Forrester Jay W. , Industrial Dynamics (New York: John Wiley & Sons, Inc., 1961).

See Cyert R. M. March J. G. , A Behavioral Theory of the Firm (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1963); Cohen K. J. , Computer Models of the Shoe, Leather, Hide Sequence (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1960); Bonini C. P. , Simulation of Information and Decision Systems in the Firm (Englewood Cliffs, N. J.: Prentice-Hall, Inc., 1963).

Bonini , op. cit.

A Manual for Players of the Carnegie Tech Management Game (Graduate School of Industrial Administration, Carnegie Institute of Technology, February 1960).

King Peter S. Massy William F. Amstutz Arnold E. Tallman Gerald B. , “The M.I.T. Marketing Game,” in Bell Martin L. , ed., Marketing: A Maturing Discipline (Proceedings of the Winter Conference of the American Marketing Association, 1960), pp. 85–102.

Simulmatics Media-Mix: Technical Description (New York: The Simulmatics Corporation, October 1962).

Orcutt Guy H. Greenberger Martin Korbel John Rivlin Alice M. , Microanalysis of Socioeconomic Systems: A Simulation Study (New York: Harper & Brothers, 1961).

Kehl William B. , “Techniques in Constructing a Market Simulator,” in Bell Martin L. , op. cit.

Cyert , op. cit.

Cohen , op. cit.

Balderston Frederick E. Hoggatt Austin C. , Simulation of Market Processes (Berkeley: University of California, Institute of Business and Economic Research, 1962).

Gereon Martin L. Maffei Richard B. , “Technical Characteristics of Distribution Simulators,” Management Science, October 1963, pp. 62–69.

This model should be compared to the one in Wells William D. , “Computer Simulation of Consumer Behavior,” Harvard Business Review, May-June 1963.

The product is one which is purchased frequently and this makes it possible to generate individual household purchase sequences as well as market share behavior over time. The product is in the competitive stage of its life cycle and this allows a focusing on the problem of market share rather than total sales growth. Furthermore, real differences can be found among brands in terms of flavor and strength and this permits competition along brand quality lines. The existence of real differences in brand qualities also gives rise to the phenomena of consumer learning and brand loyalty. Yet the loyalties are not so strong as to prevent brand switching in response to changing market strategies. The marketing strategy decision set itself is rich in possibilities: Price and price deals, premiums, packaging, shelf space, advertising, product quality, etc. These and other characteristics of the household coffee market render it a good subject for a marketing model. Furthermore, data on product, buyer, and company characteristics of purchases of this market are available from a number of sources. The weekly coffee purchases of over 500 Chicago households over several years are obtainable from the Chicago Tribune's consumer panel. A description of the social-demographic characteristics of each family is also available as well as information on any price deals which surrounded individual purchases. Periodic surveys of coffee buyers and their consumption habits and attitudes have been conducted by the Corby Research Service under the sponsorship of the Pan-American Coffee Bureau. Motivational aspects of coffee purchasing have been investigated by Social Research, Inc. Additional data are obtainable from the Marketing Research Corporation of America and the A. C. Nielsen Company.

This is an admitted oversimplification in that the purchase period varies according to the amount purchased on each occasion, the daily amount consumed, holidays, and so forth. Furthermore, in practice more than one brand may be bought at a time. Yet it world have been difficult, though not impossible, to build a, different purchasing habits and use a variable rather than discrete time interval between purchases. The choice was made in favor of a discrete time interval, a single brand choice, and a specific amount purchased by each household. It is expected that no substantive price will be paid for this simplification.