ADV 305 Lecture Notes - Lecture 21: A.D. Vision
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Langoustine Restaurant LP Case
The Langoustine is an upscale seafood restaurant located in downtown Seattle, Washington. The restaurant has recently signed a contract with a new highly acclaimed chef and expanded the seating area. In preparation for the coming summer season, the principal owners of the restaurant approved an advertising budget of $279,000 and hired a local advertising firm, ACA Consulting to launch a major advertising campaign.
The ACA consultants provided the management of the restaurant with the following information about the industry exposure effectiveness per ad, their estimate of the number of potential new customers reached per ad, the cost of each ad.
Television | Radio | Newspaper | |
EXPOSURE | 85 | 25 | 12 |
NEW CUSTOMERS REACHED per advertisement | 4,000 | 2,000 | 1,000 |
COST per advertisement | $10,000 | $3,000 | $1,000 |
The exposure rating is viewed as a measure of the value of the ad to both existing and potential new customers. It is a function of such things as image, message recall, visual and audio appeal, and so on.
At this points, the ACA consultants pointed out that the data concerning exposure rating and new customer reach were only applicable to the first few ads in each medium.
For television, ACA stated that the exposure rating of 85 and 4,000 new customers reached per ad were reliable for the first 10 television ads. After 10 ads, the benefit is expected to decline – the exposure rating from additional television ads declines to 55 and the number of new customers reached goes down to 1500.
For radio ads, the preceding data are reliable up to a maximum of 15 ads. Beyond 15 ads, the exposure rating declines to 18 and the number of new customers reached declines to 1200.
Similarly, for newspaper ads, the exposure rating beyond 20 ads declines to 5 and the number of new customers reached declines to 700.
The table below summarizes the relevant data to account for the “high” impact and “low” impact ads:
first 10 TV ads | additional TV ads beyond 10 | First 15 | additional radio ads | first 20 | additional newspaper ads | |
EXPOSURE | 85 | 55 | 25 | 18 | 12 | 5 |
NEW CUSTOMERS | 4,000 | 1,500 | 2,000 | 1,200 | 1,000 | 700 |
COST per | $10,000 | $10,000 | $3,000 | $3,000 | $1,000 | $1,000 |
Assume that the management of the Langoustine accepted maximizing the total number of new customers reached, across all media, as the objective of the advertising campaign. In addition, the following guidelines were adopted:
Use no more than 20 television ads
Allocate at least 140,000 dollars to the television ads
Restrict the radio advertising budget to $90,000 (allocate no more than $90,000 to radio ads)
Allocate at least $30,000 to newspaper budget
Use at least twice as many radio advertisements as television advertisements.
Set the minimum on the total exposure rating from the advertising campaign to 2,000
How many television, radio and newspaper advertisements should be used to maximize number of potential customers reached and meet all of the guidelines and the budget constraint of $279,000
Formulate a linear programming model for this media selection problem (define decision variables, write down the objective function, develop constraints – show all steps/calculations) and solve it using Excel’s Solver. Generate Answer report and sensitivity reports.
Use the Answer and Sensitivity reports to develop a managerial report addressing the following questions (be specific – justify your answers by referring to reduced cost, or range of optimality, or shadow price etc.):
1.How many advertisement for television, radio and newspapers should be used to maximize the number of potential customers reached by the campaign? How will the advertising budget be allocated to each type of media?
2.What will be the total exposure rating of the ad campaign?
3.Would you recommend increasing the current $140,000 limit on advertising budget for television advertisements to 141,000 dollars? Explain/justify your answer.
4.If the current advertising budget of 279,000 was reduced by $1,000 what would be the total number of potential new customers reached?
5.If the estimate of the number of potential new customers reached by the first 15 television ads were revised by ACA downward to 3000 (from 4000), would the budget allocation change? Explain/Justify.
Budget constraints on marketing research are most likely to leadto:
a wrong interpretation of the research results. | ||
an incorrectly formulated sample size and design. | ||
incorrect reasons regarding why the research is needed. | ||
pretest measurements of competitive brand sales. |
2 points
QUESTION 2
Stacy, a marketing manager at a beverage manufacturing firm,conducts a customer survey to determine the reason for a dip in thesales of Zeal, a cola, in the last quarter. The survey reveals thatthere is an immediate customer demand requiring the use of organicingredients to Zeal. The firm decides to enhance Zeal with theintroduction of organic ingredients. This new product would fallinto the category of ________.
new-to-the-world products | ||
new-to-the-firm products | ||
improvements and revisions of existing products | ||
additions to existing product lines |
2 points
QUESTION 3
Lauren is a brand manager at a company that manufacturestoothpaste. She wants to increase the sales of an existing brand oftoothpaste. To do so, she calls for a meeting with a teamcomprising of members from the administrative department, the humanresource department, and the finance department. All of thesemembers work together to come up with ways to improve the company'stoothpaste brand positioning. Such a team is an example of a________.
category-management system | ||
cross-functional team | ||
departmental team | ||
marketing-management system |
2 points
QUESTION 4
________ are methods used to determine how resources should beallocated among the various strategic business units (SBUs) in anorganization.
Vector models | ||
Matrix models | ||
Variable models | ||
Portfolio models |
2 points
QUESTION 5
For high-involvement products that require extensive decisionmaking, marketers should provide consumers with:
ready availability of the products in a variety of outlets andat competitive prices. | ||
factual information that highlights the competitive advantage ofthe products. | ||
minimum information to encourage a quick purchasing process. | ||
eye-catching advertisements and in-store displays to encouragethem to make a purchase. |
2 points
QUESTION 6
The number of times, on average, that audience members areexposed to an advertisement within a given time period is knownas:
frame rate. | ||
time to target market. | ||
reach intensity. | ||
average frequency. |
2 points
QUESTION 7
Ariston Inc. manufactures a wide range of personal careproducts. Its method of sales forecasting involves conductingdetailed surveys of retailers who stock the company's productstoward the end of a fiscal year. The aim of this survey is toestimate the quantity of Ariston's products the retailers arelikely to order in the next fiscal year. Which of the followingapproaches of sales forecasting is Ariston using?
Customer expectations method | ||
Time-series analysis | ||
Sales forecast composite method | ||
Jury of executive opinion method |
2 points
QUESTION 8
________ carry broad product assortments and compete on thebasis of offering a good selection in different product categoriesand offering lower prices on products in their largeassortments.
Specialty stores | ||
Mass merchandisers | ||
Category killers | ||
Convenience stores |
2 points
QUESTION 9
Which of the following best describes personal selling?
Personal selling is a paid form of communications about anorganization, its products, or its activities that is transmittedthrough a mass medium. | ||
Personal selling is an activity that offers customers orresellers a direct inducement for purchasing a product. | ||
Personal selling is a nonpaid form of communication that seeksto influence the attitudes, feelings, and opinions of stockholders,suppliers, employees, and political bodies about anorganization. | ||
Personal selling is face-to-face communication with potentialbuyers to inform them about and persuade them to buy anorganization's product. |
2 points
QUESTION 10
Which of the following best explains why Delicia Co., amanufacturer of potato chips, prices each bag of potato chips at 99cents rather than $1.00?
To encourage consumers to think the chips are less expensive | ||
To increase sales by offering the chips at a discountedprice | ||
To create a signal that these chips are exceptionally fine | ||
To attract those consumers who are not too sure about thequality of the chips |
2 points
QUESTION 11
Which of the following is NOT a step in the marketing researchprocess?
Performance of the research | ||
Plan of the research | ||
Preview of the research | ||
Preparation of the research report |
2 points
QUESTION 12
In the context of product purchasing, the diffusion ofinnovation is:
used to describe the ability of an organization to createentirely new products. | ||
applied to products at the introductory stage of the productlife cycle. | ||
used to describe an audit task. | ||
the spread of a product through the population. |
2 points
QUESTION 13
Distribution allowances are typical examples of ________.
push strategies | ||
profile strategies | ||
pull strategies | ||
mixed promotional strategies |
2 points
QUESTION 14
Which of the following is a benefit of mathematical modeling asa marketing research method?
It is ideal for investigating customer beliefs, attitudes,satisfaction, and other issues. | ||
It generates a substantial number of ideas when compared withother methods. | ||
It is involved in the analysis and interpretation of primarydata exclusively. | ||
It provides an efficient way to study problems with extremelylarge secondary data sets. |
2 points
QUESTION 15
Identify the persuasion objective of the sales force in personalselling.
To reassure consumers of product or service superiority throughdemonstrable actions | ||
To enable prompt delivery of the product or service that exceedscustomer expectations | ||
To ensure immediate follow-up calls and visits to addressunresolved or new concerns | ||
To clearly distinguish attributes of a firm's products orservices from those of competitors |
2 points
QUESTION 16
Which of the following statements is true of the influences ofprice, product, and promotions on consumer behavior?
Consistent bombarding of messages about a product will put offpotential consumers. | ||
Salespeople do not have a direct impact on consumer behavior andits patterns. | ||
Value-conscious consumers buy products on the basis of placerather than other attributes. | ||
Marketing communications play a critical role in informingconsumers about products and services. |
2 points
QUESTION 17
According to the VALS™ model, Experiencers are:
driven to demonstrate success. | ||
driven by a desire for social or physical activity. | ||
driven by knowledge and principles. | ||
driven by the level of resources and innovation. |
2 points
QUESTION 18
In which of the following stages of the new product developmentprocess is the new product proposal evaluated and responsibilityfor a project assigned to a project team?
Product development | ||
Idea screening | ||
Test marketing | ||
Project planning |
2 points
QUESTION 19
Which of the following is an advantage of secondary data overprimary data?
Secondary data sources are limited, making the information morevaluable. | ||
Secondary data are cheaper to obtain and utilize. | ||
Secondary data are collected specifically for the researchproblem under investigation. | ||
Secondary data are always available for strategy-specificresearch questions. |
2 points
QUESTION 20
An automobile manufacturing firm decides to meet all itssuppliers while planning to manufacture a new automobile that is aminor variant of an existing model in terms of design andperformance. The firm wants to provide its loyal customers withautomobiles at a low price without compromising on performance.According to authors Crawford and DiBenedetto, this new productfalls into the category of ________.
price redemptions | ||
repositionings | ||
price exemptions | ||
cost reductions |