Auditing Marketing Budget Allocation with Hindsight Regret

TL;DR

This paper introduces a retrospective auditing framework using hindsight regret to evaluate past marketing budget allocations, separating inefficiency from response uncertainty and providing actionable diagnostics.

Contribution

It presents a novel method for auditing historical budget decisions by estimating regret distributions and feasible reallocations under operational constraints.

Findings

The framework produces interpretable diagnostics for past allocations.

Moderate reallocations often capture most potential gains.

Larger reallocations increase uncertainty and move into weak-support regions.

Abstract

Organizations routinely make strategic budget allocations under operational constraints, but often lack a principled way to assess whether realized allocations were close to the best feasible choices in hindsight. We present a retrospective auditing framework based on hindsight regret, defined as the opportunity cost of the realized allocation relative to a constraint-faithful benchmark under the same budget and stability guardrails. The framework estimates regime-specific spend--response functions from historical logs, computes feasible hindsight allocations via constrained optimization, and propagates uncertainty through Monte Carlo evaluation to produce regret distributions, expected lift, and probability-of-improvement summaries. This separates allocation inefficiency from uncertainty in the estimated response surfaces. Experiments on real marketing allocation logs show that the framework yields interpretable post-hoc diagnostics and reveals a practical trade-off between allocation flexibility and detectability: moderate feasible reallocations often capture most measurable gain, while larger shifts move into weak-support regions with higher uncertainty. The result is a practical method for auditing historical budget decisions when online experimentation is costly or infeasible.