Beyond the Profitable-Product Death Spiral: Managing Product Mix in an Environment of Constrained Resources

Abstract

Notwithstanding the wide-spread inclusion of product-mix decisions in marketing simulation games, little theoretical work has been done to ensure that the algorithms driving them reflect current knowledge regarding product-mix strategy. Recent work based on relationship marketing theory has sought to address this problem, focusing on the impact of demand correlation within the product mix. This paper extends this line of research, using Goldratt’s theory of constraints to address the impact of supply constraints on product-mix interactions. It shows how these factors can be incorporated into a standard simulation objective function.