Understanding the Impact of Promotions on Consumer Behavior

Marketing is a complex tool companies use to publicize new products and build consumer loyalty. However, cost-effective understanding and prediction of marketing campaign influence on consumers' behavior are necessary to maintain an effective business strategy. To understand the impact of the diversity of profiles and human behaviors, it is necessary to supplement aggregated solutions with the design of granular, individual-centered Agent-Based Models suitable for describing behavioral diversity. In this article, we propose a new model that reproduces customer loyalty as an emergent phenomenon while also demonstrating the effects of price wars on consumer loyalty. The model facilitates measuring the increase in sales during discounts, the drop in competitors' sales, the negative effects of discount repetition and also complex phenomenon as decoy effect. Introducing a new product, a "decoy", in a competitive category can raise the sales of an existing product.