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Market model: demand function, profit, marketing simulation and optimization 

   MSHAPE program 

 

This program shows the behavior of a market affected by the product price, advertisement, average consumer income and other marketing parameters. The model is non-linear, based on the market elasticites that explain how the demand and profit functions react when market parameters change. Such marketing modeling and simulation can be useful while optimizing the market parameters.

The basic marketing model is that describing the demand function.  One of the most flexible models is that based on so-called market elasticities. Shortly speaking, the market elasticities tell us how the demand depends on the advertising, the product price and the consumer income. These are the main variables used in the MSHAPE program. To simulate the model changes in time we also use the seasonal index, the inflation, the general market growth rate and other variables. This and other models can be found in many publications on marketing models, like for example Kotler B., Marketing decision making: A model building approach, Holt-Rinehart-Wilson, 1971.

MSHAPE is a simple program that calculates the demand and the utility and shows them in graphical form. The main options are as follows.

File  -  standard file operations: you can save or retrieve your model
Parameters  -  to change model parameters
Demand/Utility  -  shows the model behavior

Once you have your model parameters, you can see the shape of the demand and utility functions and carry out your "what if?" experiments. Go to the Demand/Utility option. The following menu will appear.

Show utility(profit)  -  Shows the shape of the profit function as a 3D plot. The horizontal axes are price and advertising; the vertical value is the utility.

Show demand  -  Shows the demand function.

Animate utility  -  Shows the same plot, animated within one-year interval, week by week. To make the plot move, the total market growth, inflation, price growth rate and consumer income growth rate must be (at least some of them) different from zero.

Animate demand  -  Shows the demand function, animated over one year.

Optimum  -  This option permits you to seek the optimal advertisement and price. You can see the utility function color plot. Moving the mouse over the plot you can see the changing price and advertising and find an optimum. Black parts of the plot area mean zero or negative utility.

The program can be downloaded for free. It is available from the page  http://www.raczynski.com/pn/pn.htm

Other useful items: http://www.raczynski.com/img/imgman.htm  - 3D Graphics, free demo

http://www.raczynski.com/pn/pn.htm - Computer Simulation

http://www.racyznski.com/pn/encyk.htm - Simulation Encyclopedia

http://www.raczynski.com/pn/fluids.htm - Fluid Flow Analyzer

ere are some examples of graphics produced by MSHAPE 

Utility as a function of adertizing and price. In most cases it can be seen that there exists a point
on the advertizing-price plane that maximizes the profit 

 

The same profit function projected on the advertisement-price plane. The user can move the cursor over
the screen and select the optimum point or other desired combination of these two variables.

 


Stanislaw Raczynski
P.O.Box 22-783
14000 Mexico D.F.Mexico
http://www.raczynski.com
E-mail :
stanracz@netservice.com.mx