1. Marketing Resource Allocation
Marketing Analytics

2. Optimal Marketing: Misallocations Revealed

3. 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

4. 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

5. 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

6. 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

7. System of Identities Decomposition and diagnosis Triangulation
Empirical Models and Dashboards
Marketing Analytics

8. 6/13/2018 8

10. Empirical & Definitional Relationships
6/13/2018

11. The Three Pillars
Econometrics
Decision Calculus
Experimentation