Why use Econometric Models?
An econometric model is a type of statistical model which allows us to decompose sales into individual drivers e.g. price, competitors activity, marketing spend, weather etc. The model will explain how sales volume changes due to movements in the individual drivers. A good model allows you to transform a poorly understood sales total into a clear concise formula.
This formula can then be used to develop pricing and promotion strategies which will meet profit objectives.
Typical problems addressed include:
- Take a deep dive into your promotional spend. What role does this spend play in driving Category sales?
- Does promotional Market Share gain translate into profit?
- Is your promotional plan effective?
- Is your pricing plan cannibalising your own portfolio or taking from your key competitors?
- What mechanics work best for growing your base sales?
- What Partners optimise your profitability?
- Understand your elasticity by Product/Channel. Identify the optimisation point and impact on market share.