Planning its annual campaign to raise money

Reference no: EM131104191

The AB Charity is planning its annual campaign to raise money. This year, three alternative methods are being considered: (i) street collections, (ii) a television advertising campaign and (iii) a direct-mail appeal. After using simulation to assess the risk associated with the alternatives the charity's managers have opted for a direct-mail appeal.

The direct-mail appeal will involve sending out 343 000 letters to selected people. To encourage donation these will include a free ballpoint pen displaying the charity's logo and people not replying after three weeks will receive a reminder. While the fixed costs of the campaign and the cost of sending out each letter and reminder are known for certain, the charity's managers have had to estimate probability distributions for the following four factors:

(a) The percentage of people who will reply to the first letter in the North (N), Central (C) and South (S) regions of the country, respectively.

(b) The average donation of those replying to the first letter in each of these regions.

(d) The average donation of those replying to the reminder in each of the regions

Probability distributions have been estimated for the different regions because their different economic conditions are likely to have a major effect on people's propensity to donate to the charity.

Figure 12.6 shows the cumulative probability distribution of net returns (i.e., the total value of donations less the cost of running the direct-mail appeal). It can be seen that there is approximately a 20% probability that the net returns will be negative, causing the charity to lose money. In the simulation the possible losses extended to nearly $150 000.

The managers of the charity are keen to take action to reduce this risk, but are not sure where their actions should be directed. Figure 12.7 shows a tornado diagram for the appeal. The numbers at the ends of the bars show what are thought to be the highest and lowest possible values for each factor. For example, the possible average donation in the North is thought to range from $2 to $17.

Reference no: EM131104191

Questions Cloud

History of modern psychology - identify the main points : Please identify the main points of his theories and why he believed his theories contributed more toward the field of psychology. You also need criticisms to counter with against Rogers.

Generate six random observations for each : Use the uniform random numbers in cells C10:C15 of Fig. 22.1 to generate six random observations for each of the following situations.

Mogilny corporation owns a warehouse : Mogilny Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $2,700 received in advance.

Describe the core marketing functions within an organization : Describe the core marketing functions within an organization. Discuss the goals and expected outcomes of this organizational function. Explain how companies create customer-centered businesses.

Planning its annual campaign to raise money : The AB Charity is planning its annual campaign to raise money. This year, three alternative methods are being considered: (i) street collections, (ii) a television advertising campaign and (iii) a direct-mail appeal. After using simulation to asse..

History of modern psychology : Final project - history of modern psychology - These schools of thought include structuralism, functionalism, behaviorism, Gestalt psychology, and psychoanalysis.

What type of market structure does it represent : What type of market structure does it represent?

Analyze marketing strategies in reaching market with product : Consider how you would proceed when marketing a product or service and compare/contrast why certain strategies would be best for the target market.

Zubin used the accounts unearned insurance revenue : Using the data in BE3-3, journalize the entry on July 1 and the adjusting entry on December 31 for Zubin Insurance Co. Zubin used the accounts Unearned Insurance Revenue and Insurance Revenue.

User Account

All Pages