Fundamentals of market response models

Building Response Models in R

Kathrin Gruber

Assistant Professor of Econometrics Erasmus University Rotterdam

Marketing mix

Market response models

Leverage information based on past data to:

Adjust product prices.
Optimize marketing tactics and strategies.
Test the effectiveness of marketing plans.
Plan future marketing activities.

str(sales.data)

'data.frame':    124 obs. of  6 variables:
 $ OBS          : int  1 2 3 4 5 6 7 8 9 10 ...
 $ SALES        : num  22.6 22.9 80.6 85.1 81.9 ...
 $ PRICE        : num  1.09 1.27 1.27 1.27 1.27 ...
 $ DISPLAY      : int  0 0 0 0 0 0 0 0 0 0 ...
 $ COUPON       : int  0 0 0 0 0 0 0 0 0 1 ...
 $ DISPLAYCOUPON: int  0 0 0 0 0 0 0 0 0 0 ...

OBS: observation week
SALES: volume sales
PRICE: average unit price
DISPLAY, COUPON, DISPLAYCOUPON: advertising, promotion activities

Understanding sales

mean(sales.data$SALES)

119.7319

min(sales.data$SALES)

11.66749

max(sales.data$SALES)

752.7219

Let's practice!

Building Response Models in R