a425_case310 - Of course, marketing managers are likely to...

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UNIVERSITY OF ROCHESTER William E. Simon Graduate School of Business Administration APS 425 Professor G. William Schwert Advanced Managerial Data Analysis CS3-110L, 585-275-2470 Winter 2010 Fax: 585-461-5475 email: schwert@schwert.simon.rochester.edu Case # 3, Due: March 9, 2010 Corporations frequently worry about the efficacy of their advertising expenditures. This data file [A425_Pinkham.wf1] contains annual sales revenue (SALES) and advertising expenditures (ADVERT) for the Lydia Pinkham Company from 1907 through 1960, expressed in thousands of dollars per year ($000). Their sole product was an alcohol-based elixir that was supposed to cure vaguely defined “women’s ailments” (before the FDA and FTC came along and limited the scope of their claims). These data were used in early research papers by marketing academics to study long-term effects of advertising. The basic question is whether the money you spend on advertising today helps build brand capital that increases sales in future years.
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Unformatted text preview: Of course, marketing managers are likely to think positively about results that show the benefits from advertising extend past the current sales year. A skeptical view that is sometimes expressed by non-marketing managers is that the marketing department will spend any money it can get its hands on. Since it is hard to measure the effectiveness of advertising, firms spend more when it seems cheap because they have a lot of cash coming in from product sales, but cut back on advertising when times are tough and sales are down. From this perspective, high sales revenue is the cause of high advertising expenditures, not vice versa. Your assignment is to use the data in the Eviews workfile to analyze these competing views of the relation between sales and advertising for this company. In particular, provide an analysis of the efficacy of advertising for the companys owners....
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