3/23/2016 1 1 Quantitative Models in Advertising Ad bug Model to decide level of ad effectiveness for the brand and predicting future sales given ad expenditure 2 Key considerations Key considerations 1 2 Quantitative Models in Advertising Adbug John Little (1970) 1. If advertising is cut to zero, brand share will decrease, but there is a floor min , on how much share will fall from its initial value by the end of one (1) time period. 2. If advertising is increased a great deal, say to something that could be called saturation, brand share will increase but there is a ceiling or max , on how much can be achieved by the end of one time period. 3. There is some advertising rate that will maintain initial share. 4. An estimate can be made by data analysis or managerial judgment of the effect on share by the end of one period of a 50% increase in advertising over the maintenance rate. One period Time Min share at end Maintenance advertising Initial Share Share Saturation advertising +5 0% advertising Zero advertising End share with +50% AD Max share at end with saturation AD The model estimates market share response to advertising spending on market share and sales
3/23/2016 2 Quantitative Models in Advertising Ad bug Share Response v/s Advertising in period one Min Max Share Advertising +50% extra Maintenance Initial +50% min + (max –
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