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Understanding Advertising Adstock Transformations

7 Pages Posted: 16 Aug 2006  

Joy V. Joseph

Information Resources Inc

Date Written: May 15, 2006

Abstract

Advertising effectiveness and Return on Investment (ROI) are typically measured through econometric models that measure the impact of varying levels of advertising Gross Ratings Points (GRPs) on sales or on purchase decision and choice. TV advertising has both dynamic and diminishing returns effects on sales, different models capture these dynamic and nonlinear effects differently. This paper focuses on reviewing the econometric rationale behind the popularized Adstock transformation model that allows the inclusion of lagged and non-linear effects in linear models based on aggregate data.

Keywords: Advertising, Adstock Model, Non-linear transformation, Marketing-Mix

JEL Classification: M37

Suggested Citation

Joseph, Joy V., Understanding Advertising Adstock Transformations (May 15, 2006). Available at SSRN: https://ssrn.com/abstract=924128 or http://dx.doi.org/10.2139/ssrn.924128

Joy V. Joseph (Contact Author)

Information Resources Inc ( email )

PO Box 6157
Woodbridge, VA 22195

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