A Cognitive Approach for Modeling Customer Demand Dynamics for Optimal Product Release Strategies

Abstract

As agile processes are increasingly adopted for product design, and as consumer preferences are rapidly evolving with increasing information available from digital media, there is a need for a demand model that can accommodate the dynamics of product development. However, existing models of demand estimation, such as the discrete-choice models, do not capture the dynamics of product development and decision-making processes and thus are unable to effectively capture the effect of product updates and the release of information. To address this gap, we present a dynamic demand model and demonstrate how it can be used to determine the optimal time to release product updates. The demand model is based on decision field theory (DFT), which enables the modeling of the dynamic behavior of human decision makers. The contributions of this article are as follows. First, we formulate a computational model for demand modeling built on DFT and demonstrate the viability of using the model to determine product release strategies. Second, we provide analytical approximations of the demand model and compare the accuracy of the approximated demand against the demand predicted by the dynamics model. Third, we show an example of a game played by competitors trying to optimize demand for their products by choosing the optimal update time relative to each other. Finally, we demonstrate the feasibility of parameter estimation using only the demand data.