A machine learning framework for predicting and optimizing return on investment across marketing channels

Abstract

In the current fast-paced competitive marketing environment, firms require data-centric methods to maximize their investments in several avenues. This research work applies machine learning techniques to estimate the return on investment (ROI) for marketing costs, which helps organizations in budgeting more effectively. Four models including random forest, extreme gradient boosting (XGBoost), gradient boosting, and linear regression were utilized for their accuracy in making predictions. Results showed that the highest accuracy was achieved by linear regression at 99.39%, random forest at 99.07%, gradient boosting at 99.01%, and XGBoost at 98.81%. It was further noted that digital marketing avenues such as social media and online stores gave the highest ROI, indicating that companies should prioritize digital marketing more than traditional marketing. On a practical level, this approach helps marketing team for choosing high performing channels since it estimates expected returns from each marketing channels and make smarter budget allocation. Yet, the study is done by using Kaggle dataset. In order to improve its generality, future research may use larger real-world datasets and extensive visualization techniques.