Illustration 3.3 Optimally Allocating Advertising Expenditures The advertising decision is not as straightforward as it was not too long ago. As Joel Weiner, the executive vice president of marketing for Kraft, remembered, “In the olden days…you ran your commercials on the Big Three network stations and one or two locals [and] you basically reached everybody.” In the context of the discussion above, we could restate Mr. Weiner’s position as: In the past, the marginal benefit per dollar’s worth of expenditures in television advertising was so large that TV advertising was essentially the only game in town. However, cable television, video recorders, and independent stations have reduced the power of network commercials. A.C. Nielsen Co. reports that the networks’ share of the TV viewing audience declined from 90 percent in 1979-80 to 76 percent in 1985-86. At the same time, factors like the increased number of working women has made it more difficult to reach that critical female audience responsible for so many consumption decisions. The result has been that firms are using a much wider range of media to get their
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