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