Dynamic Correction in Marketing Planning Models

Most marketing planning models have carry-over effects in which one period's decisions influence the results obtained in future periods. In this paper it is shown that failure to allow for the carry-over effect beyond the planning horizon can result in underallocation of resources and in biases in the timing pattern of resource expenditure. For a wide class of market planning models, a procedure is developed to take into account this long-term effect. The distortion and the procedure are illustrated in an example.