Channel Optimization in Complex Marketing Systems

Channel optimization in multiple-channel systems is a basic problem in marketing and one which has not received much attention in the literature. A model is presented which simultaneously solves three distribution decisions--the manufacturer's choice of channels (channel strategy), the number of outlets to operate within each channel (channel intensity), and the pricing structure between channels (channel management). The general form of this model is not solvable by conventional programming techniques because it is intrinsically nonconvex. The paper shows how signomial geometric programming can provide a theoretically attractive and practical solution procedure. The model is estimated and solved on a real-life case study and the important managerial and theoretical implications are discussed.marketing: distribution, programming: geometric, channels

New-product success in the pharmaceutical industry: how many bites at the cherry?

Using quarterly data for 56 new ethical-drug products launched between 1989 and 1996, we estimate the coefficients of a regression equation that has cumulative future sales beyond the forecast period as its dependent variable and third-quarter sales, post-launch product improvements and promotional activities, pre-launch product quality and speed to market, and market growth as the independent variables. We find the future success of a new product to be detectable as early as the third quarter after launch, and that while post-launch promotional activities can contribute to that success, if the product has not shown signs of life by the third quarter it is unlikely to do so afterwards. The implication is that being first to the market can contribute to the success of a new drug, as can having the highest-quality drug, though neither being first nor being best is necessary. Rather, a new drug can be both the first and the best in its product category, but if strong signs of success do not appear within nine months after launch, the drug is likely to be fighting a losing uphill battle thereafter, even in a growing market. Or, at least in pharmaceuticals, you get only one bite at the cherry.Product life cycle, Diffusion process, New-product launch, Pharmaceuticals, Early-success signals, Jump-start hypothesis,