Allocation of budget on marketing efforts: an econometric approach in India

Abstract

Purpose Budget allocation on individual marketing efforts is a complex issue for managers. The purpose of this paper is to estimate the elasticities of individual marketing efforts to allocate budget by taking into consideration two brands in India. Design/methodology/approach Historical data on physical sales and various marketing efforts (advertising, sales force, promotion, distribution and price) have been collected for two brands. Double‐log regression model has been fitted on data to estimate the elasticity of sales to each effort. Subsequently, the estimated elasticities have been used to allocate budget on the individual marketing efforts in question. Findings Various interesting results have been observed, such as the sales force claimed the highest amount of budget for both the brands. Further, managers of both the brands are under‐spending on all the efforts except for advertising in the case of second brand. Practical implications The findings will provide insight into allocation of budget on individual marketing efforts objectively instead of subjectively, which dominates in the field of marketing. Originality/value This research captures the real‐world situations (rather than small scale lab‐studies or theoretical modeling) and will definitely add some value in marketing literature.

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