Introduction

Managers are concerned with forecasting the effects of advertising and media decisions on sales. Econometrics is an umbrella term for a range of statistical techniques for developing causal models for that purpose; the term covers marketing mix modeling (MMM), media mix modeling, and attribution modeling. Underlying the various techniques of econometrics is the process of fitting a least-squares regression model to time-series or, less commonly, panel data. In marketing, econometrics is intended to answer forecasting questions, such as:

  • How will changes in the marketing mix affect sales?
  • What is the right amount to spend on media?
  • Which medium or media combinations will be most effective or efficient?
  • Is it better to schedule for flighting or continuity?
  • When will these ads wear out?
  • How much economic activity is derived from advertising expenditure?
  • Where should the next marketing dollar be spent?