Optimizing the Media Mix—Evaluating the Impact of Advertisement Expenditures of Different Media

Abstract

Focusing on the consumer finance business of a large financial company of Europe, this chapter analyzes the efficiency of advertising expenditures on three media—TV, print, and the Internet. Using a data envelopment analysis (DEA) method, it assesses the overall efficiency of the media and the effective combinations in attracting new loan applications. It develops an optimal media mix model to evaluate the effect of different media expenditure in getting the approved new loans to the business. Total cost per week for TV, print, and Internet is used as inputs and two outputs; namely, approved new loans and calls received per week are used within a DEA framework to estimate the efficiency score. The incremental benefits from this analysis were estimated at 38 %. The efficiency score developed in this chapter clearly recognizes the best practices weeks, with that we can identify the best combination of media, which serves the purpose best in terms of acquiring new loan applications. Finally, a media mix builder is developed to guide the business for the future strategies. Advertising analytics is gaining momentum as a powerful means to efficient targeting. Sir Martin Sorell, CEO of WPP Group, one of the world’s largest advertising agencies, calls econometrics the holy grail of advertising. Moreover, several top advertising agencies have now created teams of econometricians to do this type of analysis for clients. Therefore, this research and further research in this area are necessary to insure that advertising resources are well spent.

This chapter contains contributions from S. Raja Sethu Durai, Madras School of Economics, Chennai, India.