Reference no: EM131922013

Question: Advertising Media Helen Troy, owner of three Sound Haus stereo equip-ment stores, is deciding what advertising medium to use to promote her newest store. She found direct-mail ads effective for reaching her current customers, but she wants to attract new customers too. The best prospects are professionals in the 25-44 age range with incomes over $38.000 a year. But only some of the people in this group are audiophiles who want the top-of-the-line brands she comes. Troy narrowed her choice to two media: an FM radio station and a biweekly magazine that focuses on enter-tainment in her city. Many of the magazine's readers are out-of-town visitors interested in concerts, plays, and res-taurants. They usually buy stereo equipment at home. But the magazine's audience research shows that many local professionals do subscribe to the magazine.

Troy (eels that ads an six issues will generate good local awareness with her target market. In addition, the magazine's color for-mat will let her present the prestige image she wants to convey in an ad. She thinks that will help convert aware prospects to buyers. A local advertising agency will pre-pare a high-impact ad (or $2,000, and then Troy will pay for the magazine space. The FM radio station targets an audience similar to Troy's own target market. She knows repeated ads will be needed to be sure that most of her target audience is exposed to her ads. Troy thinks it will take daily ads for several months to create adequate awareness among her target market. The FM station will provide an announcer and prepare a tape of Troy's ad for a one-time fee of $200. All she has to do is tell them what the ad should say. Both the radio station and the magazine gave Troy reports summarizing recent audience research. She de-cides that comparing the two media in a spreadsheet will help her make a better decision.

a. Based on the data displayed on the initial spread-sheet, which medium would you recommend to Troy? Why?

b. The agency that offered to prepare Troy's maga-zine ad will prepare a fully produced radio ad-including a musical jingle-for $2,500. The agency claims its ad will have much more impact than the ad the radio station will create. The agency says its ad should produce the same results as the station ad with 20 percent fewer insertions. If the agency claim is correct, would it be wise for Troy to pay the agency to produce the ad!

c. Troy thinks that the agency-produced ad might create greater awareness, even with the smaller number of insertions. Use the What If analysis to vary the percent of prospects who become aware from 80 to 90 percent. Prepare a table showing how the cost per buyer and cost per aware prospect change with different awareness levels. What are the implications of your analysis.