Evaluating the profitability of advertising for heavily advertised brands: an empirical study

Even companies with large advertising budgets are sceptical of OR models in advertising—such models often appear overly complex, unrealistic and costly to use. Here a simple econometric model is proposed which utilises existing company data. The parameters are estimated for the five leading brands in a sector of the German alcoholic drinks market. Estimates of the short and long run advertising elasticities are made and optimum advertising appropriations are calculated.