Optimal Advertising Budget Allocation across Markets with Different Goals and Various Constraints

Abstract

Advertising budget allocation across multiple markets has drawn considerable attention in recent years. To expand previous research and fill a gap in the current literature, this study proposes two decision models for optimal budget allocation decisions across multimarkets with different goals and various constraints. In addition to the market parameters proposed by the Vidale–Wolfe model, the present study incorporates market goals and advertising objectives into budget allocation decisions. Different types of markets are defined in terms of the goal set for market share or profit. Given the characteristics of different markets, two separate decision models are developed. Model I aims to maximize sales volume given a fixed advertising budget, while model II seeks to minimize the advertising budget given a total of targeted sales volume for all the markets. Solutions to the two models are discussed, and a numerical example is provided to demonstrate how to apply the models in making budget allocation decision.