Integrated Marketing Communications in Markets with Uncertainty and Competition

Abstract:     
Firms frequently utilize multiple communications instruments as part of their marketing campaign. Interactions between these instruments suggest that firms should apply Integrated Marketing Communications (IMC) to benefit from the synergies. We review different IMC models and then present a stochastic IMC model for which explicit closed-loop solutions of the optimal advertising and market share are obtained. This enables us to understand the role of firm and market parameters, such as synergy, on the optimal advertising budget and allocation. For the proposed and existing IMC models we show that the budget and allocation decisions can be made independently, greatly simplifying the implementation of IMC. We also show that there is an optimal long-run market share that the firm should try to maintain through appropriate use of IMC. Finally, the model and results are generalized to multiple (>2) instruments and multiple competitors.

Keywords: Advertising, Dynamics, Budgeting, Integrated Marketing Communications, Decisions under Uncertainty, Dynamic Optimization

JEL Classifications: M31, M37, C61, C73

Accepted Paper Series