ADVERTISING, PR, SELLINGOUTLINEHISTORICAL PERSPECTIVEPowerPoint PresentationSlide 5ADVERTISING COPYHOW MUCH SHOULD YOU SPEND ON ADVERTISING?APPROACHESRESPONSE ANALYSISSlide 10MODEL EXTENSIONSSlide 12Slide 13ESTIMATIONPERSONAL SELLINGROLE OF SELLINGSlide 17Slide 18Slide 19Slide 20PRINTEGRATIONSlide 23IMPLICATIONSSlide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31ADVERTISING, PR, SELLING15.823 Internet marketingProf. Glen L. UrbanSpring 2001OUTLINE•Historical Perspective•Advertising Copy•How Much to Spend on Advertising•Acquisition/Retention Modeling•Role of PR and SellingHISTORICAL PERSPECTIVE•TV Model 1950’s•1960s - 80s -- Stable Media Mix•1990’s –Interactive TV–Internet Banners–Push Marketing•Internet 2000 –Eye Ball Race -- Print/TV/Banners–Click Through Rates Down–Personalized Ads -- Streaming Video•Current - 2001–Multi-Channel–Customer Life Time Value–Rich MediaADVERTISING COPYHOW MUCH SHOULD YOUSPEND ON ADVERTISING?APPROACHES•All You Can Afford•Match Competition•Sales Goal - Short Run - Long Run Share•Profit (Loss Goal)•Reach and Frequency Goals•Response - Sales/Profits-functions-flow modelRESPONSE ANALYSISAsk what you are getting for your $Marginal response -- profit -- sales -- customer acquisitionSlide #1SIMPLE FLOW MODELAWAREVISIT SITEBUYLOYALTYUNAWARE.33.33.03.75MODEL EXTENSIONS•Depth of Repeat•Multi-period•Competition•Additional VariablesSALESREVENUEPROFIT BEFOREADVERTISINGPROFIT AFTERADVERTISINGADVERTISINGSALES RESPONSE -- MAXIMIZE PROFITDOLLARSDOLLARSWHAT WE KNOWADVERTISINGSALESPROFIT AFTER ADVERTISING PROFIT BEFORE ADVERTISING***A0ESTIMATIONJUDGMENTSTATISTICS -Sale History- Nielsen- Click StreamEXPERIMENTATIONPERSONAL SELLINGROLE OF SELLING•Still need•Complex System Design•Big price•B2B•Communication MixFUNCTIONAL SUBSTITUTIONAWARENESSPERCEPTIONPREFERENCEPURCHASESELLINGADVERTISING ADVERTISINGSELLINGSELLINGNEW METHODSAWARENESSPERCEPTIONPREFERENCEPURCHASETELEMARKETINGADVERTISINGSELLINGSELLINGTELEMARKETINGTELEMARKETINGINTERNETSELLINGNEW METHODSAWARENESSPERCEPTIONPREFERENCEPURCHASETELEMARKETINGADVERTISINGSELLINGSELLINGTELEMARKETINGNEW METHODSAWARENESSPERCEPTIONPREFERENCEPURCHASEPRINTERNETSELLINGTELEMARKETINGPR•“Free” ads- actually many pay- invest in PR (“marketing”) staff•Believability•Word of Mouth Transfer -- CommunityINTEGRATION•Behavioral Flow Model•CLTV ModelTraditionalMedia Reach FrequencyMedia SpendingCopyCopyCopyStoreStorePick upReturnFlow Internet FeatureStrategy/Data Mining- Browse- WOM – PR- Visit site- Entertaining/Easy to use site- Dialogue- Personalization- Information- Fair / Compete- Education- Personal- Comparison- Advisor- Configuration- 800/email advise- Overcome objections- EOffer- Trust- Overlay Channel- Mail / Home Delivery- WOM -- opinions- Relationship- ServiceAWAREUNAWAREINTERESTKNOWLEDGEATTITUDEPREFERENCECONFIDENCEPURCHASEUSE / LOYALTYIMPLICATIONS•Advertising Goals (budget & copy)•Will Increasingly Become Response•Acquisition Modeling and Loyalty•Communication Mix- advertising / PR- multi-channel sellingILLUSTRATIVE EXAMPLESIZE OF MARKET 10,000NUMBER OF SEGMENTS 5PRICE OF PRODUCT $ 16,000CONTRIBUTION MARGIN $ 5,000FIXED COST $750,000COSTS ONE AD $ 30,000COST OF PERSONAL VISIT $ 125COSTS OF ONE TELESELL $ 37.50ADVERTISING REACH 1 AD .1 10 ADS .65FRACTION READ AD .5MODELSEGMENT 1AWARENESSREQUESTRECOMMENDPURCHASERESOURCESADVERTISINGPERSONAL SELLINGTELEMARKETINGAWARENESSREQUESTRECOMMENDPURCHASEAWARENESSREQUESTRECOMMENDPURCHASESEGMENT 2SEGMENT NOUTPUTSALESSALES / CALLPROFITPROFIT / CALLMODELTable 8.3PROBABILITY OF RECOMMEND BY MIX AND SEGMENTSEGMENT 1 SEGMENT 5ONE SATURATION ONE SATURATIONAdvertising .07 (.25) .014 (.05)Telesell .09 (.40) .018 (.08)Personal Sell .11 (.5) .022 (.10)Ad & Personal .17 (.6) .034 (.12)Personal & Tele .19 (.8) .038 (.16)Ad & Personal & Tele.25 (.85) .05 (.17)BASE -ALL SELLINGSALES FORCE SIZE 28NUMBER OF CALLS / YEAR 22,000TOTAL SALES ($) 13,984,000COMMUNICATION BUDGET ($) 2,750,000PROFIT ($) 870,000PROFIT / CALL 39.55SELLING ALLOCATIONPERSONAL SELLING +ADVERTISING + TELEMARKETINGCOLD CALLS(PERSONAL)220001200CALLS(TELESELL)22000SEGMENT12345ALLSELL44210FOLLOW UP“PRESOLD”ALL BEST BEST WITHSELL WITH ADS TELEMARKETINGNUMBER OF ADS - 7 -NUMBER PERSONAL CALLS 22,000 20,140 11,040NUMBER TELESELL - - 29,200TOTAL SALES 13,984 14,056 20,710COMMUNICATION BUDGET 2,750 2,727 2,475PROFIT 870 915 3,215PROFIT/PERSONAL CALL 40 45 291PROFIT / COMMUNICATION BUDGET .32 .34 1.30PROFIT PER HOUR OF TOTAL SELLING EFFORT 1.97 2.20 8.76SALES PER HOUR OF TOTAL SELLING EFFORT 316 348