Determining advertising budgets using econometrics

Date of publication: June 1, 1978

Author: Michael Stewart


The only rational way to set an advertising budget is to estimate as well as one can the likely sales and cost consequences of each of the range of feasible advertising expenditures and choose the one which maximises the future profit (or other expression of corporate goals) - future earnings being discounted to present values at an appropriate discount rate. Econometrics is one method of estimating the sales effects of recent advertising - this then being taken as a guide to the effect of future advertising.

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