Research On Problem Of Advertising Budget Allocation Considering Uncertain Consumer Preferences

Consumers are usually affected by advertising when purchasing new products.Thus,in order to promote consumers to buy the products and thus to obtain higher profits,most enterprises always use advertising as one of the most important means of promotion,and spend large funds for advertising.However,to constantly improve the total advertising budget might bring greater financial risks,since advertising is a relatively complex activity and its cost is relatively large.Therefore,compared to simply increase the total budget,the reasonable allocation of the advertising budget is more important.In practice,in order to effectively allocate the advertising budget,some critical factors,such as the consumer preferences for products,the response of consumers to advertising,the profits brought by the products,etc,are always need to be considered,in which consumer preferences for products is one of the main internal factors that can affect consumers to purchase the products.Hence,allocating the advertising budget considering consumer preferences could make the advertising budget invested more effective and thus could gain greater profits for the enterprise.How to effectively allocate the limited advertising budget considering uncertain consumer preferences is usually one of the most important problems which faced by most enterprises,since the consumer preferences for products is often uncertain.At present,the research with respect to the problem of advertising budget allocation has already caused extensive concerns of the industry and the academia.And these studies have achieved notable results.However,through the analysis of the studies,the existing studies paid less attention to the consumer preferences for products,especially the uncertain consumer preferences.Based on this,it is needed to further research the problem of advertising budget allocation considering uncertain consumer preferences.With respect to the problem of advertising budget allocation considering uncertain consumer preferences,this paper carried out several related research works.The works are conducted as follows.Firstly,the consumer purchase decision model and the expected profit model of the enterprise are established,respectively.To begin with,the problem of advertising budget allocation considering uncertain consumer preferences is described.Then,in order to measure consumer preferences for products more reasonably,this paper introduces the unobserved product attributes and their utilities.Based on this,a multi-attribute utility function is used to measure the consumer utility.Besides,the stimulating effects of advertising on the consumer purchase behavior are analyzed detailed.Based on this,the optimization models of the enterprise and the consumer are established,respectively.Secondly,the methods to estimate probability distribution of the uncertain consumer preferences are proposed.Two methods,the Probability Inversion and the Bayesian,are used to estimate the uncertainty of consumer preferences.Then,through comparing the probability distributions of uncertain consumer preferences which obtained by the two methods,several propositions are obtained.The research conclusions can provide the relatively more comprehensive decision support to select the more appropriate method to estimate the consumer preferences for the enterprise.Thirdly,the two-stage dynamic game method considering the uncertain consumer preferences is elaborated and analyzed.Based on measuring the uncertainty of consumer preferences,the game process between the enterprise and the consumer is elaborated.Then,by analyzing a case,the effectiveness of the incomplete information dynamic game method to solve the problem of the advertising budget allocation considering the uncertain consumer preferences is verified.