Building Econometric Models for a Marketing Company

Business challenge

The company set an objective to assess the efficiency of budget spending on the advertising of manufactured drugs, and to build an optimal advertising strategy.

Solution

IBA Group experts together with methodologists from the consulting company analyzed the costs of advertising in the media, on TV and radio, outdoor advertising and online promotional campaigns. Five-year data were used to take into account the impact of economic factors and seasonal fluctuation. Specialists created an interpretive forecast model with a seasonal component and identified key parameters that influence brand loyalty.

The results of the study showed that outdoor advertising is greatly overestimated and its efficiency needs to be evaluated more carefully. In addition, advertising a single product in a product line may increase sales of all products in a line – the so-called “halo effect,” when brand visibility due to the main product is extended to cover the entire line.

Result

Marketers obtained new tools: a dashboard for comparative analysis of the sales level and advertising efficiency in various channels, and a calculator for the optimal allocation of budgets for the forecast period. They were used to identify budget limits, above which there’s no point to invest in promotion, because the efficiency of advertising campaigns decreases sharply and does not lead to expected sales.

Financiers and budget owners use accurate data to plan investments in each advertising channel for various estimated levels of advertising budgets.