Modelling markets

Peter Leeflang

Research output: Chapter in Book/Published conference outputChapter (peer-reviewed)peer-review


Decision makers in marketing are often faced with rather complicated situations in which decisions have to be made. Let us consider the problem of determining the appropriate advertising budget. A brand manager is asked to determine the optimal budget. He knows that increases in advertising may lead to increased sales, but also lead to increased costs. The advertising expenditures in period t, say 1994, may not only lead to increases in sales in t, but also to increases in t + 1 (1995) and possibly may contribute to the value of the brand for a long time period.2 Increases in sales will result in changes in profit. The decision maker is allowed to spend more advertising money if there is more profit and more sales, thus advertising spending depends on past sales and profit performance. In order to account for these and possibly other relationships it is necessary to formalise these relations. This means that the decision maker has to specify which variables influence which other variables and what the directions of causality between these variables are. To this end a model has to be formalised, data have to be collected and the formalised model has to be calibrated.
Original languageEnglish
Title of host publicationMarketing theory and practice
EditorsMichael J. Baker, et al
PublisherPalgrave Macmillan
Number of pages35
ISBN (Electronic)978-1-349-24260-3
ISBN (Print)978-0-333-64182-8
Publication statusPublished - 1995

Publication series

NameMarketing management


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  • Marketing theory and practice

    Baker, M. J. (ed.), Badot, O. (ed.), Bernard, K. (ed.), Brown, S. (ed.), Brownlie, D. (ed.), Carter, S. (ed.), Chan, K. C. (ed.), Cova, B. (ed.), Crosier, K. (ed.), Diamantopoulos, A. (ed.), Donaldson, B. (ed.), Ennis, S. (ed.), Ghauri, P. (ed.), Hart, S. J. (ed.), Leeflang, P. (ed.), Littler, D. (ed.), McDermott, M. C. (ed.), Mcgregor, L. (ed.), Rajagopal, S. (ed.), Tixier, D. (ed.), & 1 othersWebb, J. (ed.), 1995, 3rd ed. Springer. 422 p. (Marketing management)

    Research output: Book/ReportEdited Book

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