A dynamic marketing-operations interface model of new product updates

Two critical success factors for nearly any firm are the introduction of new products and the integration of the marketing and operations functions within the business enterprise. The series of products being considered are associated with sequential non-disruptive innovations in technology, but disruptive in fashion. The study presents a model that integrates and builds upon the popular dynamic Bass model for new product diffusion in marketing and the Wagner and Whitin dynamic lot-sizing model, a seminal model in operations management. The end result is a model that simultaneously determines the optimal timing for the introduction of new product generations, pricing, production timing and produced quantities. This model is then used to examine the impact of variations in marketing and operations parameters on both optimal profit and optimal product lifecycle length. The study finds that larger profit and a faster pace of new product introductions are generally associated with faster diffusion, lower price elasticity, larger market potential, lower new product introduction cost and more costly consumer products.