Product positioning using a self-organizing map and the rings of influence

George C. Hadjinicola, Christakis Charalambous, Eitan Muller

Research output: Contribution to journalArticlepeer-review

Abstract

In this article, we propose a new product positioning method based on the neural network methodology of a self-organizing map. The method incorporates the concept of rings of influence, where a firm evaluates individual consumers and decides on the intensity to pursue a consumer, based on the probability that this consumer will purchase a competing product. The method has several advantages over earlier work. First, no limitations are imposed on the number of competing products and second, the method can position multiple products in multiple market segments. Using simulations, we compare the new product positioning method with a quasi-Newton method and find that the new method always approaches the best solution obtained by the quasi-Newton method. The quasi-Newton method, however, is dependent on the initial positions of the new products, with the majority of cases ending in a local optimum. Furthermore, the computational time required by the quasi-Newton method increases exponentially, while the time required by the new method is small and remains almost unchanged, when the number of new products positioned increases. We also compute the expected utility that a firm will provide consumers by offering its products. We show that as the intensity with which a firm pursues consumers increases, the new method results in near-optimal solutions in terms of market share, but with higher expected utility provided to consumers when compared to that obtained by a quasi-Newton method. Thus, the new method can serve as a managerial decision-making tool to compare the short-term market share objective with the long-term expected utility that a firm will provide to consumers, when it positions its products and intensifies its effort to attract consumers away from competition.

Original languageEnglish
Pages (from-to)431-461
Number of pages31
JournalDecision Sciences
Volume44
Issue number3
DOIs
StatePublished - Jun 2013
Externally publishedYes

Keywords

  • Competition
  • Kohonen's Self-Organizing Map
  • Probabilistic Choice Models
  • Product Design/Planning
  • Product Positioning

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