Marketing expenditures in the form of pricing, product development,
promotion and channel development are made to maximize return on
investment. A challenge in evaluating the effectiveness of these
expenditures is dealing with the potential simultaneity of an output
measure, such as sales, and input measures, such a promotional
spending, that are jointly determined by consumer preferences and
sensitivities. While marketing control variables are explanatory of
sales, they are not determined independent of the marketplace. This
paper proposes an approach to dealing with the simultaneous relationship
among input and output variables that yields measures of the efficiency
of converting inputs to outputs, and the optimal allocation of input
variables. We illustrate our approach using data from a services company
operating in multiple geographic regions.
Meet the speaker in Room 212 Cockins Hall at 4:30 p.m. Refreshments will be served.