Time Dependent Model for Promotional Campaign or Sales Response to

Advertising in Presence of Competition.

The time dependent model, as the name suggest is a model in which we spend some money on
promotional efforts in order to fetch sales depends very much on the time for which activities are
carried out. In order to develop this model we shall study the factors on which the model
depends.

1. Sales Decay Constant: In the environment of cut throat competition, in the absence of
advertisement or promotional effort, the sales of the period tend to decrease. This may be
because of the product becoming obsolete or the competitor’s promotional plan.

Under relative constant market conditions, so the rate of decrease may be a constant; so the rate
at any time ‘t’ of the not promoted product is given by

S( t ) = S0.e− λt
where S0 is the initial sales rate.

λ is called the sales decay rate constant and e− λ represent the exponential sales decay constant.
λ is very high for the product which quickly becomes obsolete in a highly competitive market
and λ is small for well established products.

2. Saturation Level: When some money is spent on promotional effort of a product, the sales
are likely to go up. But it does not mean that we keep increasing our expenditure on
promotional efforts in the hope that the amount spent will generate extra sales. Due to the
fixed market structure and finite users of the product, the product cannot be used to infinitely
large quantities i.e. no matter how much we spend there will be a point after which the sales
will not increase. That level of maximum sale is called the saturation level which depends
upon market conditions and promotional policies of the company.
 3. Sales Response Constant: Let ‘r’ represent the initial response of sales i.e. the sales
generated per advertising unit when (s=0) i.e. sales rate s is zero. We can say that the response
depends upon the unsaturated sales. Let ‘R’ be the sales generated per unit expenditure, when
the sales rate is S (i.e. sales generated at any ‘S’)
( M − S) is the unsaturated sale.
Now
∴R∝ ( M − S)
Here S is the sales rate at which we wish to see the response.
=R k( M − S) , where k is a constant.
At initial sales
= = r ( say)
R kM
r
⇒ k=
M
r
=R ( M − s)
M
represent the response at any level of sales rate and is =0.

Combining the above 3 factors we have

It is easily observed that till we spend money on PE, there is an increase in sale S and likewise
we reach upto the saturation level when we stop promoting a product then from that time decay
starts i.e. there is a considerable decrease in sales rate. In real life, even if the company spends
some money on promotional plans, the sales may not go up. This is because of the

• The product has become obsolete.

• The competitor’s promotional plan or advantage of competitor’s product and company’s
product.

With the above information, we will now develop a model for the promotion and efforts impact
on sales.
S( t ) : Rate of sales at time ‘t’.
A( t ) : Rate of advertising expenditure at time ‘t’.
M : Saturation level.
r : Sales response constant.
λ : Sales decay constant.

Now rate of change of sales at time ‘t’ may be written as

dS( t )
= A( t ) × Responseof per unitexpenditureon PE− decay insalesrate
dt
dS( t )
i.e = A( t ).R− λ .S( t )
dt
dS( t ) r
⇒ = A( t ). ( M − S( t ) ) − λ .S( t ) (1)
dt M

Case I: When we have a constant rate of promotional effort. i.e. we spend a constant amount at
any time ‘t’ in the planning period [ 0,T] .
Let A( t ) = A, also we assume that the product decay rate is negligible as the company is well
established and the market is stable i.e. λ = 0. Then equation (1) becomes

dS( t ) r
= A( t ). ( M − S( t ) )
dt M
dS( t ) Ar
+ S( t ) =
Ar
dt M
This is a linear equation.
Ar
∫ M
dt
I.F = e
Solution:
 Art Art
S( t ).e
= M
∫ Ar.e M
dt + c
Art
−
⇒ S( t ) =M + ce
. M

= S( t ) S0
At t 0,=
S=
0 M+ c
⇒ c = S0 − M
Art
−
S( t ) =M + ( S0 − M).e M

Art
−
=M − ( M − S0 ).e M

In the planning period [ 0,T] , ' A' is the count rate of expenditure on promotional efforts and λ
the decay rate is zero. Then at any instant of time ‘t’, 0 ≤ t ≤ T , the sales level is given by the
equation
Art
−
S( t ) =M − ( M − S0 ).e M

Case II: Now as we stop spending on our promotional plans. The sales are adversely affected.
Now we shall try to see the impact of sales after the time ‘T’, when no promotional planning is
done and sales decay rate is given to be a constant. From the above information, we have

dS( t )
= −λ .S( t ) , t ≥ T
dt
dS( t )
+ λ .S( t ) =
0
dt
dS( t )
= −λ dt
S( t )
on solving, we get
logS( t ) =−λ t + c ( cisaconstant )
e− λt+c
⇒ S( t ) =
= e− λt .c1
=t T=
when , S( t ) S( T)
e− λT .c1
⇒ S( T) =
⇒ S( T).eλT
c1 =
 e− λt .S( T) eλT
⇒ S( t ) =
= S( T).e− λ ( t−T)
⇒ S( t ) =S( T).e− λ ( t−T) (2)

Case III: Let us now consider the case when the amount spent on promotional effort is a
constant in the planning horizon [ 0,T] . Also we consider the decay rate is a constant λ i.e.
A( T) = Aand λ is a constant. The sales rate at any given time is given by

dS( t ) r
= A. ( M − S( t ) ) − λ .S( t )
dt M
dS( t ) Ar
⇒ = . − S( t ) − λ .S( t )
Ar
dt M
dS( t )  Ar
⇒ +  + λ  S( t ) =
Ar
dt M 
This is a linear equation.
 Ar 
∫  M +λ dt
I.F = e
 Ar + λ t
 
M 
=e
∴solution is
 Ar + λ .t  Ar + λ t
   
S( t ).e M 
= ∫ Ar.e M 
dt
− + λ .t
Ar
Ar
(t)
⇒ S= + ce
. M 
( Ar
M
+λ )
where t=0, S( t ) = S0
Ar
= +c
( )
S0
Ar
+λ
M
Ar
⇒ c = S0 −
Ar
M (+λ )
  
Ar  Ar  − ArM +λ .t
∴S
=(t) +  S0 −
( ) ( )
Ar Ar  .e
+λ  +λ 
M  M 
Also at t=T, we have
 
Ar  Ar  − ArM +λ .T
( T)
S= +  S0 −
( ) ( )
Ar Ar  .e
+λ  +λ 
M  M 

Substituting S(T) in equation (2), we get

   
 Ar  Ar  − ArM +λ .T  − λ ( t−T)
S( t ) 
= +  S0 − , t≥T
( ) ( )
Ar Ar  .e  .e
 +λ  +λ  
 M  M  
We see that S(T) increases with increase in time
 
 Ar 
 S0 − Ar <0
 +λ 
 M 
Ar
⇒ S0 < Ar
+λ
M
⇒ S0  + λ  < Ar
Ar
M 
SAr
⇒ S0λ < Ar − 0
M

⇒λ <
Ar 1− 0
S
M( )
S0