Modeling Marketing Mix Using Smoothing Splines

Capturing non-linear advertising saturation and diminishing returns without explicitly transforming media variables

The established approach among marketers for modeling marketing mix is to apply linear regression models which assume the relationship between marketing activities such as advertisement spend and the response variable (sales, revenue) is linear. Prior to modeling, media spend variables should undergo two necessary transformations to properly capture the carryover effect and the saturation effect of the advertisement spend. It is known, …

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