ADVERTISING, PR, SELLING Internet marketing Prof. Glen L. Urban Spring 2001

OUTLINE Historical Perspective Advertising Copy How Much to Spend on Advertising Acquisition/Retention Modeling Role of PR and Selling

HISTORICAL 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 –Multi-Channel –Customer Life Time Value –Rich Media

ADVERTISING COPY

HOW MUCH SHOULD YOU SPEND 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 model

RESPONSE ANALYSIS Ask what you are getting for your $ Marginal response -- profit -- sales -- customer acquisition

Slide #1 SIMPLE FLOW MODEL AWARE VISIT SITE BUY LOYALTY UNAWARE

MODEL EXTENSIONS Depth of Repeat Multi-period Competition Additional Variables

SALES REVENUE PROFIT BEFORE ADVERTISING PROFIT AFTER ADVERTISING SALES RESPONSE -- MAXIMIZE PROFIT DOLLARS

WHAT WE KNOW ADVERTISING SALES PROFIT AFTER ADVERTISING PROFIT BEFORE ADVERTISING * * * A 0

ESTIMATION JUDGMENT STATISTICS -Sale History -Nielsen -Click Stream EXPERIMENTATION

PERSONAL SELLING

ROLE OF SELLING Still need Complex System Design Big price B2B Communication Mix

FUNCTIONAL SUBSTITUTION AWARENESS PERCEPTION PREFERENCE PURCHASE SELLING ADVERTISING SELLING

NEW METHODS AWARENESS PERCEPTION PREFERENCE PURCHASE TELEMARKETING ADVERTISING SELLING TELEMARKETING INTERNET SELLING

NEW METHODS AWARENESS PERCEPTION PREFERENCE PURCHASE TELEMARKETING ADVERTISING SELLING TELEMARKETING

NEW METHODS AWARENESS PERCEPTION PREFERENCE PURCHASE PR INTERNET SELLING TELEMARKETING

PR “Free” ads - actually many pay - invest in PR (“marketing”) staff Believability Word of Mouth Transfer -- Community

INTEGRATION Behavioral Flow Model CLTV Model

IMPLICATIONS Advertising Goals (budget & copy) Will Increasingly Become Response Acquisition Modeling and Loyalty Communication Mix - advertising / PR - multi-channel selling

ILLUSTRATIVE EXAMPLE SIZE OF MARKET10,000 NUMBER OF SEGMENTS5 PRICE OF PRODUCT$ 16,000 CONTRIBUTION MARGIN$ 5,000 FIXED COST$750,000 COSTS ONE AD$ 30,000 COST OF PERSONAL VISIT$ 125 COSTS OF ONE TELESELL $ ADVERTISING REACH 1 AD.1 10 ADS.65 FRACTION READ AD.5

MODEL SEGMENT 1 AWARENESS REQUEST RECOMMEND PURCHASE RESOURCES ADVERTISING PERSONAL SELLING TELEMARKETING AWARENESS REQUEST RECOMMEND PURCHASE AWARENESS REQUEST RECOMMEND PURCHASE SEGMENT 2 SEGMENT N OUTPUT SALES SALES / CALL PROFIT PROFIT / CALL MODEL

BASE - ALL SELLING SALES FORCE SIZE28 NUMBER OF CALLS / YEAR22,000 TOTAL SALES ($)13,984,000 COMMUNICATION BUDGET ($)2,750,000 PROFIT ($)870,000 PROFIT / CALL39.55

SELLING ALLOCATION PERSONAL SELLING + ADVERTISING + TELEMARKETING COLD CALLS (PERSONAL) CALLS (TELESELL) 2 0 SEGMENT ALL SELL FOLLOW UP “PRESOLD”

ALLBESTBEST WITH SELLWITH ADSTELEMARKETING NUMBER OF ADS-7- NUMBER PERSONAL CALLS22,00020,14011,040 NUMBER TELESELL--29,200 TOTAL SALES13,98414,05620,710 COMMUNICATION BUDGET2,7502,7272,475 PROFIT ,215 PROFIT/PERSONAL CALL PROFIT / COMMUNICATION BUDGET PROFIT PER HOUR OF TOTAL SELLING EFFORT SALES PER HOUR OF TOTAL SELLING EFFORT