Quantifying the indirect effects of a marketing contact

The Internet banner advertising has become an important marketing channel in recent years. There is a strong demand in the industry to quantify the expected return from a marketing contact. Contacts have both direct effects, such as a banner ad prompting the viewer to click and buy, and indirect effects, such as building awareness so that future exposures are more likely to result in a sale. While it is usually straightforward to track and model direct effects, models that fail to account for indirect effects produce inaccurate estimates of the contact value and allocate marketing resources inefficiently. Our research is based on a relational database for banner ads from a major American internet service provider, which records the complete information about the exposures, the clicks and the transactions. The indirect effect of marketing contacts is modeled with a decaying function of the time since the prospect gets into the system. Discrete survival analysis is used to estimate the marginal effects of each additional exposure. The approach is illustrated with a pedagogical example based on the estimates from the internet banner ad model.