Multiperiod Multiproduct Advertising Budgeting: Stochastic Optimization Modeling

Multiperiod Multiproduct Advertising Budgeting: Stochastic Optimization Modeling

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Article ID: iaor201529925
Volume: 59
Issue: 4
Start Page Number: 26
End Page Number: 39
Publication Date: Mar 2016
Journal: Omega
Authors: , ,
Keywords: stochastic processes, optimization, simulation, economics, advertising
Abstract:

We propose a stochastic optimization model for the Multiperiod Multiproduct Advertising Budgeting problem, so that the expected profit of the advertising investment is maximized. The proposed model is a convex optimization problem that can readily be solved by plain use of standard optimization software. It has been tested in a case study derived from a real advertising campaign. In the case study, the expected profit of the stochastic approach has been favorably compared with the expected profit of the deterministic approach. This provides a quantitative argument in favor of the stochastic approach for managerial decision making in a data-driven framework.

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