Modeling the “Profitable-Product Death Spiral”

Abstract

Business simulation game designers typically ignore product line interactions in the design of marketing simulation games. This article addresses the failing by modeling Rust, Zeithaml, and Lemon’s concept of the profitable-product death spiral, a product-mix interaction theory based on the concept of customer lifetime value (CLV). According to their theory, marketers often enter a cycle of decreasing demand by deleting less profitable products. When customers seek multiple products from the same company, the deletion of less profitable ones will often reduce demand for more profitable products as well, rendering them less profitable. Unchecked, the cycle continues until the company fails. This article discusses how to model the “death-spiral” effect by adapting Teach’s gravity-flow model to evaluate the product mix as a kind of “meta-product,” where desired products function as product attributes.