Optimal advertising control policy for a new product in segmented market

Market segmentation is the foundation of which all other marketing actions can be based. It requires a major commitment by management to customer oriented planning, research, implementation and control. The overall objective of using a market segmentation strategy is to improve company's competitive position and better serve the needs of customers. In this paper, we use the concept of market segmentation in diffusion model for advertising a new product considering the external as well as internal influences and study the optimal advertising effectiveness rate in a segmented market. First, we discuss the evolution of sales dynamics in the segmented market under the assumption that the firm advertises in each segment independently. Further case of a single advertising channel, which reaches several segments with fixed spectrum, is also discussed. Such problems have not been discussed before. The optimal control theory is applied to study and solve both classes of problems.