Practice Prize Winner—Dynamic Marketing Budget Allocation Across Countries, Products, and Marketing Activities

Abstract

Previous research on marketing budget decisions has shown that profit improvement from better allocation across products or regions is much higher than from improving the overall budget. However, despite its high managerial relevance, contributions by marketing scholars are rare. In this paper, we introduce an innovative and feasible solution to the dynamic marketing budget allocation problem for multiproduct, multicountry firms. Specifically, our decision support model allows determining near-optimal marketing budgets at the country–product–marketing–activity level in an Excel-supported environment each year. The model accounts for marketing dynamics and a product's growth potential as well as for trade-offs with respect to marketing effectiveness and profit contribution. The model has been successfully implemented at Bayer, one the world's largest pharmaceutical and chemical firms. The profit improvement potential is more than 50% and worth nearly €500 million in incremental discounted cash flows.

Sales promotion by wholesalers affects general practitioners’ prescription behaviours in Japan

“…As the productivity of the pharmaceutical industry’s R&D has declined [12], companies have turned to several cost containment strategies. Among these strategies is sales promotion, the practice of which is often questioned in developed countries, including Japan [13].…”

Brand Performance Volatility from Marketing Spending

“…This relation also holds in a competitive Nash equilibrium (Fischer et al 2011), where * and Q * reflect equilibrium values and depend on equilibrium competitive expenditures as defined in (1). We will use * , the optimal equilibrium mean expenditure level, as a useful reference point in the subsequent analysis.…”

“…We will use * , the optimal equilibrium mean expenditure level, as a useful reference point in the subsequent analysis. Let us also introduce˜ , the near-optimal expenditure level that is derived from current parameter values according tõ Fischer et al (2011) show that, using this relation as a periodic rule to determine the optimal budget under Nash competition,˜ quickly converges to the true optimum. In addition, we use the coefficient of variation as a normalized measure of the volatility of own and competitive marketing expenditures.…”

Marketing Practices and Profitability of a Company: A Study by Machine Learning Method

“…Интерес исследователей к маркетинговым практикам (МП) и к опти мизации маркетинговых бюджетов под тверждается значительным ростом публи каций по этой тематике в течение послед них десяти лет (см., напр. : [Albadvi, Koosha, 2011;Fischer et al, 2011] и др.) и увели чением бюджетов компаний, выделяемых на маркетинговую деятельность.…”