978-0136074892 Solution Manual Chapter 10 Part 2

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2005. Analyzes paid product TV shows for

one-year period.

·Influencing word-of-mouth: Investment in activities

that will spread word-of-mouth

·Up-and-comers: Other types of media too new to

evaluate

·Choosing the specific vehicles:

·Allocating the budget allocation properly includes:

·Use of statistics describing each vehicle

·Appropriateness of the vehicle for the product

·Methods of choosing media include:

·Analyzing the media: comparison of

efficiency and regional differentiation

·Contextual fit: Vehicles that are a good fit for

the product or service being marketed (media

fit and ad context)

·Duplication and wear out: Duplication (multiple

exposures) may be desirable or undesirable.

·Scheduling advertising

·Three basic patterns of advertising can be used over a

proscribed time period:

·Flighting: Alternates burst of advertising with

a period of no advertising

·Continuous pattern of advertising: Evenly

spread and distributed over a period

·Pulsing: Basic level of advertising combined with

regular bursts of advertising

8. Budgeting

·One of most important jobs for marketing manager is to determine

how much to spend

·Setting advertising budgets has an immediate impact on costs and

longer-term effects on sales

·Figure 10.12 Page 305 Relationship between Cumulative

Advertising Spending and Market Share. Shows examples of

successful relationship between advertising investment and market

share.

·Most common methods for setting advertising budgets:

·Objective/task: Budgeting by objectives and the tasks needed to

achieve those objectives

·Percentage of sales: Selects a percentage of sales, either or past,

or expected to devote to advertising (Table 10.9 Page Top 5 and

Bottom 5 Industry Advertising-to-Sales Ratios in 2001 by SIC

Code Shows some examples of advertising-to-sales expenditures

in a specific year.

·Competitive parity: Budgeting attempts to spend at levels

proportional to the competition’s.

·Affordability: Similar to “percentage-of-sales.” Ultimate method

of “advertising as a cost of doing business.”

·Experimentation: In addition to use in setting budgets and

potential evaluation of advertising copy, it is used as a way of

assessing effectiveness.

·Decision calculus: Computerized decision support systems help

structure budge decisions systematically.

9. Measuring advertising effects

·Surprising little expenditures on assessing effectiveness.

·Some existing methods include:

·Tracking studies

· Experimentation

D. Objective Guarantees

1. Some agencies have begun to give advertisers guarantees on achieving

certain objectives.

E. Marketing-Mix Modeling: Linking Past Sales and Advertising

1. An approach to evaluating advertising effectiveness is to use historical data

and statistical methods to estimate the relationship between advertising

spending and market response vehicles such as sales or market share.

2. Statistical methods used are normally regression or some other advance

econometric technique. Example:

·Sales = a + bAdv (Where a and b are unknown parameters that are

estimated from the data)

3. Numbers of studies in this area have yielded generalized results (Appears

average elasticity of current advertising on sales is about 22%. (100% increase

in advertising yields about 22% increase in sales)

4. Number of companies has created real-time systems combining marketing

mix modeling and decision calculus models

F. Technology’s Impact on Advertising

1. New technologies are continuously being developed to deliver more creative

and better-targeted advertising.

Teaching Tips and Strategies from Barbara S. Faries, MBA

The purpose of this chapter is to introduce the concepts involved with strategic

price setting.

Key Terms and Concepts Introduced Include:

·Customer value

·Price discrimination

·Price bands or tiers

·Reservation price

·Pricing elasticity of demand

·Value-in-use

·Dollarmetric measurement

·Conjoint analysis

·Field experiments

·Penetration pricing

·Market share pricing

·Skimming

·Prestige pricing

·Return on sales pricing

·Investment pricing

·Competitive pricing

·Reference price

·Price bundling

·Product-line pricing

·Complementary pricing

·Value pricing

·Periodic discounting

·Flat-rate vs. variable rate pricing

Note: Two recurring themes in this Instructor’s Manual are the first two items:

·Link theory to practice.

·Engage students to link work experience to the concepts demonstrated in

the text.

·Instructors are encouraged to link theory to practice by finding current examples

in the business environment that demonstrate the key concepts above.

·If your class contains those already working in the field, have them describe how

the concepts in theory match those in the actual workplace.

From the view of both executive and academic, I routinely see the following issues:

1. Students and staff who fail or are challenged to understand and effectively implement an

integrated marketing communications program that is consistent with the marketing

strategy for the product or service. It is critical that they understand the importance of an

IMC strategy with the over-arching marketing strategy.

2. Students who cannot understand the difference between vehicles used in consumer

advertising and those used in business-to-business settings. Most students focus on

consumer settings and situations and ignore business-to-business. A clear distinction needs

to be drawn to distinguish the two.

3. In classes in which a budget or media plan is required for a business-to-business product

or service, I sometimes see students who use consumer types of media for a business-to-

business setting. Distinguishing business-to-consumer and business-to-business advertising

is necessary.

4. Students who are often carried away with or only focused on new media. While the

balance is definitely shifting, it is important for them to understand the value of traditional

media in certain settings.

5. Students who do not understand the value of new media in business-to-business settings.

6. Students (and some staff) who do not understand the basic principles of budgeting and

allocation of funds and the resulting correlation between budgeting and sales. I normally

introduce several spreadsheet models to assist them in developing a comprehensive budget.

Review Questions

1. Integrated marketing communication (IMC) is a very important concept in

marketing. What are the barriers to a marketing manager’s implementation of

IMC? If IMC is not achieved, what is the impact on the marketing strategy?

2. Find two different ads: one with an emotional appeal and one with a rational

appeal. How would you design an advertisement for each of the two products with

the opposite appeal?

3. Consider two different products: an industrial product and a consumer product.

How would the media for these products differ? What would affect the advertising

scheduling for these two products?

4. Suppose that a new communication program is being developed for your school.

What would be the goals of this program? What information would you collect to

measure the effectiveness of the program?

5. As noted in the chapter, although Web advertising spending has increased

significantly, low click through rates have discouraged many companies from

expanding their Web advertising budgets. Go to several sites with banner ads and

pick some that you think are good and some that are not. Ignoring click through,

why or why not are they effective at achieving other communications goals?

6. Occasionally, companies will use media contrary to normal industry practice. For

example, a B-to-B product might be advertised on network TV and a frequently

purchased product would use no TV advertising. Under what conditions might this

happen?

Business-to-business entities may use network TV to simply develop awareness or

recognition. The purpose is not to create immediate sales but to create top-of-mind

awareness and visibility as part of a longer-term strategy. This type of advertising buy

might be scheduled during business or news programming or within certain cable

programming.

Consumer advertising of a frequently purchased products might use other vehicles such as

radio, Internet, specific cable channels (not network). The reason might be cost, targeting,

or the product may be so well known that network advertising might not be appropriate.

Exercises, Activities, and Projects

Purpose: To help students link theory to real life.

To demonstrate the important implications of advertising and communications

issues.

·Have the students take a look at some of the top brands (suggest using consumer

and business-to-business examples) and analyze their communications approach

both from an integration standpoint and a consistency to market strategy

approach.

·Have the students develop budgets using the budget approaches discussed in the

latter part of the chapter. Then, discuss with the results in terms of the “best

apparent choice” for the situation.