Maximizing the Market Share of a New Product in a Competitive Environment through Targeted Community Formation

Core Concepts

By strategically forming a community of targeted users and leveraging their influence, a new product can establish a positive market share even in a market dominated by an existing product.

Abstract

The key highlights and insights from the content are: Motivation: When a new product enters a market already dominated by an existing product, it faces the challenge of surviving and gaining market share. The paper aims to address this problem by identifying an optimal set of users to target with advertisements and form a community that can help the new product establish a positive market share. System Model: The authors model the competition between the new product (Product 2) and the existing dominant product (Product 1) using the bi-SIS (Susceptible-Infected-Susceptible) epidemic model. They introduce the concept of a "community" where a subset of users actively engage and influence each other, thereby increasing the spread of the new product. Problem Formulation: The authors formulate an optimization problem to maximize the market share of the new product (Product 2) under a given budget constraint. The problem involves determining the optimal set of users to target and the level of investment in the community (captured by the parameter γ). Analysis: The authors employ a perturbation-based approach to analyze the sensitivity of the new product's market share with respect to the targeted users. They establish a key result that the increase in market share is roughly proportional to the Perron-Frobenius eigenvector of the modified adjacency matrix, which captures the influence of the targeted users. Optimization and Heuristic: The authors define an optimization problem to find the locally optimal set of users to target, given the budget constraint. They also propose a heuristic algorithm to solve this problem efficiently. Experimental Evaluation: The authors evaluate their approach using real-world social network datasets and compare it against baseline methods, such as centrality-based measures and the NetShield algorithm. The results demonstrate that the proposed approach outperforms the baselines in terms of the new product's market share, under both homogeneous and heterogeneous cost distributions. Overall, the paper presents a novel approach to help a new product establish a positive market share in a competitive environment by strategically forming a community of targeted users and leveraging their influence.

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Key Insights Distilled From

Keeping Up With the Winner! Targeted Advertisement to Communities in Social Networks

by Shailaja Mal... at arxiv.org 04-01-2024

https://arxiv.org/pdf/2403.19903.pdf

Deeper Inquiries

How can the proposed approach be extended to handle the competition of more than two products in the same market

To extend the proposed approach to handle the competition of more than two products in the same market, we can consider a multi-product competition scenario. This would involve modifying the bi-SIS model to accommodate multiple competing products and their interactions within the network. Each product would have its adoption rate, recovery rate, and influence on other users. The optimization framework would need to be adjusted to select an optimal set of users for each product, considering the dynamics of the entire competitive landscape. By incorporating additional parameters and constraints for each product, the model can be expanded to analyze the coexistence or dominance of multiple products in the market.

What are the potential limitations or drawbacks of the bi-SIS model in capturing the complex dynamics of product competition, and how can the model be further refined to address these limitations

The bi-SIS model, while effective in capturing the dynamics of product competition on social networks, has some limitations. One drawback is that it assumes a homogeneous influence rate among users in the community, which may not always reflect real-world scenarios where users have varying levels of influence. To address this limitation, the model can be refined to incorporate heterogeneous influence rates, where different users have different probabilities of influencing their peers. Additionally, the model could be enhanced to consider temporal dynamics, user preferences, and external factors that impact product adoption. By refining the bi-SIS model to account for these complexities, it can provide a more accurate representation of product competition dynamics.

What other factors, beyond the network structure and user interactions, could influence the success of a new product launch, and how can they be incorporated into the optimization framework

Beyond the network structure and user interactions, several other factors can influence the success of a new product launch. Market conditions, consumer behavior, brand reputation, pricing strategies, and marketing campaigns all play a crucial role in determining the product's adoption and market share. These factors can be incorporated into the optimization framework by introducing additional parameters related to market conditions, consumer preferences, and competitive strategies. By integrating these factors into the model, the optimization framework can provide a more comprehensive analysis of the product launch strategy and help identify the most effective approach to maximize market share.