C04 LP CASES12ed

C04 LP CASES12ed - Case Problem 1 PLANNING AN ADVERTISING...

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Case Problem 1 PLANNING AN ADVERTISING CAMPAIGN The Flamingo Grill is an upscale restaurant located in St. Petersburg, Florida. To help plan an advertising campaign for the coming season, Flamingo's management team hired the ad- vertising firm of Haskell & Johnson (HJ). The management team requested HJ's recom- mendation concerning how the advertising budget should be distributed across television, radio, and newspaper advertisements. The budget has been set at $279,000. In a meeting with Flamingo's management team, HJ consultants provided the follow- ing information about the industry exposure effectiveness rating per ad, their estimate of the number of potential new customers reached per ad, and the cost for each ad. Exposure New Customers Cost Advertising Media Rating per Ad per Ad per Ad Television 90 4000 $10,000 Radio 25 2000 $ 3,000 Newspaper 10 1000 $ 1,000 The exposure rating is viewed as a measure of the value of the ad to both existing cus- tomers and potential new customers. It is a function of such things as image, message recall, visual and audio appeal, and so on. As expected, the more expensive television advertise- ment has the highest exposure effectiveness rating along with the greatest potential for reaching new customers. At this point, the HJ consultants pointed out that the data concerning exposure and reach were only applicable to the first few ads in each medium. For television, HJ stated that the exposure rating of 90 and the 4000 new customers reached per ad were reliable for the first 10 television ads. After 10 ads, the benefit is expected to decline. For planning purposes, HJ recommended reducing the exposure rating to 55 and the estimate of the potential new cus- tomers reached to 1500 for any television ads beyond 10. For radio ads, the preceding data are reliable up to a maximum of 15 ads. Beyond 15 ads, the exposure rating declines to 20 and the number of new customers reached declines to 1200 per ad. Similarly, for newspa- per ads, the preceding data are reliable up to a maximum of 20; the exposure rating declines to 5 and the potential number of new customers reached declines to 800 for additional ads. Flamingo's management team accepted maximizing the total exposure rating, across all media, as the objective of the advertising campaign. Because of management's concern with attracting new customers, management stated that the advertising campaign must reach at least 100,000 new customers. To balance the advertising campaign and make use of all advertising media, Flamingo's management team also adopted the following guidelines. Use at least twice as many radio advertisements as television advertisements. Use no more than 20 television advertisements. The television budget should be at least $140,000.
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This note was uploaded on 03/07/2010 for the course MATH 2310 taught by Professor Shakroh during the Spring '09 term at Langara.

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C04 LP CASES12ed - Case Problem 1 PLANNING AN ADVERTISING...

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