ADVERTISING, PR, SELLING
15.823 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 - 2001– Multi-Channel– Customer Life Time Value– Rich Media
ADVERTISING COPY
HOW 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 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
.33
.33
.03
.75
MODEL EXTENSIONS
• Depth of Repeat
• Multi-period
• Competition
• Additional Variables
SALES
REVENUE
PROFIT BEFORE
ADVERTISING
PROFIT AFTER
ADVERTISING
ADVERTISING
SALES RESPONSE -- MAXIMIZE PROFIT
DO
LL
AR
S
DO
LL
AR
S
WHAT WE KNOWADVERTISING
SALES
PROFIT AFTER ADVERTISING
PROFIT BEFORE ADVERTISING
*
*
*
A0
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 ADVERTISING
SELLING
SELLING
NEW METHODS
AWARENESS
PERCEPTION
PREFERENCE
PURCHASE
TELEMARKETINGADVERTISING
SELLING SELLING
TELEMARKETING
TELEMARKETING
INTERNET
SELLING
NEW METHODS
AWARENESS
PERCEPTION
PREFERENCE
PURCHASE
TELEMARKETINGADVERTISING
SELLING 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
Traditional
Media Reach Frequency
Media Spending
Copy
Copy
Copy
Store
Store
Pick up
Return
Flow Internet Feature
Strategy/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 Service
AWARE
UNAWARE
INTEREST
KNOWLEDGE
ATTITUDE
PREFERENCE
CONFIDENCE
PURCHASE
USE / LOYALTY
IMPLICATIONS
• Advertising Goals (budget & copy)
• Will Increasingly Become Response
• Acquisition Modeling and Loyalty
• Communication Mix
- advertising / PR
- multi-channel selling
ILLUSTRATIVE EXAMPLE
SIZE OF MARKET 10,000
NUMBER OF SEGMENTS 5
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 $ 37.50
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
MO
DEL
Table 8.3
PROBABILITY OF RECOMMEND BY MIX AND SEGMENT
SEGMENT 1 SEGMENT 5
ONE 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 SELLING
SALES FORCE SIZE 28
NUMBER OF CALLS / YEAR 22,000
TOTAL SALES ($) 13,984,000
COMMUNICATION BUDGET ($) 2,750,000
PROFIT ($) 870,000
PROFIT / CALL 39.55
SELLING ALLOCATION
PERSONAL SELLING +
ADVERTISING + TELEMARKETING
COLD CALLS
(PERSONAL)
2
2
0
0
0
1200
CALLS
(TELESELL)
2
2
0
0
0
SEGMENT
1
2
3
4
5
ALL
SELL
4
4
2
1
0
FOLLOW UP
“PRESOLD”
ALL BEST BEST WITH
SELL WITH ADS TELEMARKETING
NUMBER OF ADS - 7 -
NUMBER PERSONAL CALLS 22,000 20,140 11,040
NUMBER TELESELL - - 29,200
TOTAL SALES 13,984 14,056 20,710
COMMUNICATION BUDGET 2,750 2,727 2,475
PROFIT 870 915 3,215
PROFIT/PERSONAL CALL 40 45 291
PROFIT / COMMUNICATION BUDGET .32 .34 1.30
PROFIT PER HOUR OF TOTAL SELLING EFFORT 1.97 2.20 8.76
SALES PER HOUR OF TOTAL SELLING EFFORT 316 348 560