Agent Based Modeling for Marketing Strategies and Planning
To analyze the dynamics of the consumer market, it is very important to model and simulate the following six stages.
For Example: In case of Insurance industry, there are many reasons or events occurring in customer’s life such as new home, new job, moved to new place, divorce, marriage etc which force the consumer to go for new policy.
Customer experience is very important factor in deciding future purchase by the customer. Depending upon whether the customer had GOOD or BAD experience previously, they decide whether to go for shopping with same company or not.
For Example: In case of Insurance industry, Bad/Good claim experience, rate increase, poor service experience, poor service by agent, dropping by the insurer, etc these all have a cumulative effect on the customer’s mind that decide whether to buy the insurance from previous carrier or chose the new carrier.
As the market is dynamic, there are many providers for the same products customer wants to use/ buy. Hence, customer is always looking for GOOD DEALS that he can buy, that meets his/her need better, which provide value to the investment, that meets his financial needs, the deals with which he/she is satisfied. Hence, the customer has got no specific traits. The business intelligence is needed to extract this information through surveys and classify them as “Personal Motivation” of customer for purchase.
For Example: The customer will go through all above stages mentioned and then will decide whether to buy that particular policy or search for a BETTER DEAL that meets his/her requirements.
Every organization spends millions of dollars on advertising, just to make sure that there are reaching their customers through different channels that customer prefer. Surveys are conducted and the information is used for deciding future advertising strategies. It is important to analyze how the customer react to ads, what impressions do they have about the company and how likely are they to be biased towards that company after seeing the ad.
For Example: In case of Insurance industry, there are many insurance providers and there is a tough competition. All of them spend millions of dollars on advertising. If someone wants to know how likely the customer will buy the products from particular insurance provider, then one must take into account the marketing efforts and its interpretation by the customer.
Consumers have their own views about the company from which they purchased products previously based upon their experience. With this, they tend to evaluate products provided by different companies, compare prices for better deal, recommend product to their neighbors, friends, relatives, co-workers etc. This makes the consumer market even more dynamic to analyze. One must take the Consumer Activity into account if he wants to analyze the final market share.
For Example: In case of Insurance industry, consumers have their own experiences with previous or current insurance provider. Due to this they are likely to evaluate products by other companies, compare prices, ask their friend about their opinions, recommend somebody for the insurance etc. These all things make the Insurance market very dynamic and complex. To analyze the market share of Insurance providers, Consumer Activity is a very important factor.
There are Agents / distributors who sell products for the company. They have their own methods of working and their selling effectiveness affects the final decision made by consumer whether to buy the product or not. The factors such as Price Attractiveness, Product Appeal etc also affect the final decision by consumer. Hence, while analyzing the dynamics of consumer market, Selling Process is another important factor that has to be considered.
For Example: In case of Insurance industry, Agents effectiveness is very important that affects the consumers final decision whether to by the insurance or not. Hence, sometimes, customers just shop and they leave without buying the products or they get defected by other Company Agents.
“Agent based Modeling” helps to analyze all above six factors affecting the consumer market. It helps to analyze the possible growth opportunities, the areas of improvement. It provides an insight into “Emerging Behavior” of overall market. Generally, the data required for this modeling and simulation is obtained through various surveys. Finally, the model helps to identify the Market Penetration, Market Share, Sales over a period of time etc.
The “Agent Based Modeling” is widely used in business/various industries to analyze the emerging behavior of the market and develop-operate the strategies for grab more market share.