Determining the Optimal Level of Media Spending

Peter Danaher and Roland Rust

Describes and illustrates a practical model for determining optimal levels of media expenditure (GRPs).

Determining the Optimal Level of Media Spending

Peter Danaher and Roland Rust

It is the day of the cost cutters, and if advertising is viewed as a cost, then advertising will be cut, too, and it will continue the decline it has experienced in recent years. However, if advertising is instead viewed as an investment, then the goal becomes to find the level of media spending which will maximize the return on investment. The purpose of this paper is to adopt the point of view that advertising is an investment and propose a simple formula for calculating the...

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