AEM 4550.pptVIP

* * * * * Relation to textThis slide relates to material on 229 and Figure 7-10 of the text. Summary OverviewThis slide show two models of the advertising/sales response function. A lot of research and discussion has gone into trying to determine the true relationship between advertising and sales and the shape of the response curve. Most advertisers subscribe to one of two models of the advertising/sales response function: The concave-downward function, which assumes that the effects of advertising spending follow the microeconomic law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. The logic is that those with the greatest potential to buy will likely act on the first (or earliest) exposures, while those less likely to buy are not likely to change as a result of the advertising. The S-shaped response function, which assumes that initial outlays of the advertising budget have little impact (range A). However, after a certain budget level has been reached (range B) advertising and promotional efforts begin to have an effect, and additional increments of expenditures result in increased sales. When advertising expenditures enter range C, however, incremental spending will have little additional impact on sales. Use of this slideThis slide can be used to explain the two models of the advertising sales/response function. Although there are some weaknesses associated with these models, they do provide managers with a theoretical basis of how the relationship between advertising spending and sales might work. 3rd Quarter 2002 Analyst Presentation * * 3rd Quarter 2002 Analyst Presentation * * 3rd Quarter 2002 Analyst Presentation * * Advertising Impact Duration(Robert P. Leone) The average advertising duration interval on sales is brief—typically between six and nine months. * TV Advertising Effect The average TV advertising to sales elasticity is 0.11 for established consumer products. It is higher for t