how to allocate marketing resources across retailers? · price elasticity then you can see the...
TRANSCRIPT
How to allocate marketing resources across retailers?
Example: Cheese Manufacturer (Borden brand)
Data
Cheese manufacturer (Borden)
88 stores in the U.S, 65 weeks
Sales (VOLUME), PRICE, DISPLAY (in-store advertising, percentage of ACV on display), store ID variable (RETAILER)
Data source: R bayesm package More details available : Bayesian Statistics and Marketing, Peter E. Rossi, Greg M. Allenby, Rob McCulloch, p73, WILEY
The impact of price and promotion (In store display)
differs by markets and retailers
Business Problem
Where should marketing resources be allocated across retailers (88 stores)?
DISPLAY advertising budget
PRICE discount promotion (coupon) budget
Method Selection
Sample Data
Choose Sample (cheese, 88 retailers in the U.S.)
The 88 retailers sample data is only available for “Advanced plan” You can get similar results with 13 retailer sample data under “Basic plan”
Variable Selection
Select the variables for Sales, Price, Store, and Promotion, and click the "Run" button
Price Elasticity
Then you can see the store level demand analysis. The interactive histogram shows "price elasticity" across 88 stores.
Price elasticity = % change in Sales % change in Price
When price is decreased by 10%, the sales will be increased by 9.54%
=price elasticity x % change in price (-0.954*-0.1)
Sales Lift by DISPLAYDISPLAY Sale Lift score shows how much sales could be lifted given DISPLAY in-store ad is 100%
Sales Lift by DISPLAY = {exp(Est_DISPLAY x DISPLAY)-1}x100, when DISPLAY = 1 (100%)
Base Sales Lift score is 100
When in-store DISPLAY ad coverage is 100%, the sales is increased by 462.94%
Results Table
The impact of DISP on sales is (exp(Est_DISPLAY)-1)x100 %
given Display is 1 (100%)
You can get the summary table by clicking the other tab ("Table" , "Est", "R output").
What if analysis
In-store Display ad simulation
What if analysis:
When in-store DISPLAY ad coverage is 10%,
the sales is increased by 18.86%
[exp(1.728 * 0.1) -1 ]*100=18.86
Est_DISPLAY is 1.728
Resource Allocation
A marketer should prioritize their DISPLAY
advertising budgets to the most sensitive
stores (DISP Lift scores are high), and allocate
price discount promotions (like discount
coupons) to the most price sensitive markets
where the price elasticity is highest (absolute
value)