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Marketing Resource Allocation
Marketing Analytics
Rajkumar Venkatesan
Optimal Marketing:
Misallocations Revealed
Rajkumar Venkatesan
Resource Allocation Process
• Determine the objective function?
– Market Share, Profits, Customer Lifetime Value etc.
• Build a econometric (regression) model for the unknown values in
the objective function
– The regression model will be a function of marketing inputs of interest.
E.g., price, advertising, sales calls etc.
• Once the regression model is obtained, predict the objective function
using the regression function
• Identify the optimal value of the marketing input that maximizes the
objective function.
– Hint: Solver
– Hint: Regression function connects marketing inputs to the objective
function
Rajkumar Venkatesan
Resource Allocation Process
Linear Regression
Number of
New
Prescriptions
Sales
Calls
Profit
Per
Physician
Direct to
Consumer
Advertising
Probability of a
New
Prescription
Logistic Regression
Marketing Cost
Rajkumar Venkatesan
Resource Allocation Process
• Profit per physician =
# of New Prescriptions * prob (New Prescriptions)
- # of Sales Calls * Unit cost of Sales Calls – # of DTC Spots * Unit
Cost of a DTC Spot
• # of New Prescriptions = a + b1*# of Sales Calls + b2 * # of DTC Spots
• prob (new prescriptions) = exp (u) / [1+exp(u)]
– u = c + d1* # of sales calls + d2* # of DTC spots
• Regression gives you;
– a, b1, b2, c, d1, d2
Rajkumar Venkatesan
Relationships Among Metrics
• Marketers generally rely on a portfolio or “dashboard”
of metrics to better assess market dynamics and derive
focused strategies and solutions.
•Marketers should appreciate the relationship between
and among metrics as well as the limitations inherent in
each.
•But, KISS
6
Rajkumar Venkatesan
System of Identities
• Decomposition and diagnosis
• Triangulation
• Empirical Models and Dashboards
Marketing Analytics
Rajkumar Venkatesan
5/10/2017
Rajkumar Venkatesan
8
Rajkumar Venkatesan
Empirical & Definitional Relationships
Unit Price
Consumer
Preference %
Share
ID
Promotion Lift
%
EM
Advertising
Sales Force
EM
Trade Promotion
Distribution
PCV %
EM
Empirical Relationship
ID
Identity Relationship
Metrics
5/10/2017
Constructs*
EM
Decision Levers
10
Rajkumar Venkatesan
The Three Pillars
Econometrics
Decision
Calculus
Experimentation
Rajkumar Venkatesan