Resource Allocation Model

What you put in... What you get out...
  • Number of market segments, products, geographies or other basis for resource allocation
  • Current level of spending and associated sales
  • Profit margins
  • Response functions - how sales would change if spending were higher or lower than current spending
  • Constraints (minimum / maximum) for each basis unit
  • Optimal level of total spending
  • Optimal allocation of spending across units
  • Profit associated with optimal plan versus current plan
  • Incremental gain or loss associated with changes from current or optimal plan

Resource Allocation helps optimize resource sizing and resource allocations across segments, products, channels, etc. It answers such questions as

resource allocation
  • How much should we spend in total during a given planning horizon?
  • How should that spending get allocated to each product or market segment? To each marketing mix element? How much of our budget should be spent on advertising and other forms of impersonal marketing communications? On sales promotions? On the sales force?
  • How should budgets given to an individual (e.g., salesperson, manager of department) be allocated? To customers? To geographies? To sub-elements of the marketing communications mix? Over time?

There are four primary steps:

  • Enter data for current efforts and outcomes-- typically these are hard data about current market situations.
  • Enter calibration data--typically these are judgmental data, unless there are data available from experimentation.
  • Calibrate the response curves. Check to ensure that the curves fit the points.
  • Run the analysis (and optionally enter constraints).

Associated Videos

The following video(s) are archived recordings of previous webinars discussing the Resource Allocation model.These videos are intended for instructor viewing only as many times they discuss actual business case solutions.

Videos are only available for Registered Instructors

Business Cases - Resource Allocation Model

The following business cases are available to demonstrate the Resource Allocation Model using Marketing Engineering for Excel software:

  1. C-Tek Corporation Business Case - Using the Resource Allocation model, students must evaluate real world tradeoffs associated with sales force allocation decisions.
  2. John French CALLPLAN Business Case - Using the Resource Allocation model, students must determine how John French should best allocate his sales calling time among his various clients.

Technical Note - Resource Allocation Model

The Resource Allocation model technical note is a supplement to the material provided in the Principles of Marketing Engineering. This note provides additional analytic background to the model and may be freely distributed to your students.

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To view other technical notes, please visit our Technical Notes page.