Modeling Tactical Product-Mix Decisions: A Theory-of-Constraints Approach

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 strategically, focusing on the impact of demand correlation within the product mix. This article extends this line of research to a tactical level, 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.