Marketing Decision Variables and the Model
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Four key marketing decision variables are price (P), advertising (A), transportation (T), and product quality (Q). Consumer demand (D) is influenced by these variables. The simplest model for describing demand is n terms of these variables is:
D = k â?" pP +aA + tT +qQ
Where k, p, a, t, and q are constants. Discuss the assumptions of this model. Specifically, how does each variable affect demand? How do the variables influence each other? What limitation might this model have? How can it be improved?
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Marketing Decision Variables and the Model
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Assumptions
1. Demand is only determined by the four key marketing decision variables. This is not true in general as demand can be influenced by many other variables, such as income, culture and etc.
2. Law of diminishing return does not hold. In this model, each variable affects demand in a linear fashion, that means, holding everthing else constant, increasing one variable by 1 unit will ...
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