Bohlander Botanicals develops hybrid tea roses. A relative  newcomer to the field, Bohlander is looking for innovative ways to advertise its products to potential customers. Rose Mayfield, sales manager and avid online shopper, wonders about advertising the company’s roses on various gardening websites. She has contacted Kimland Media, Inc., an advertising  firm specializing in Internet advertising campaigns, to explore some options.

After meeting with Rose, Sami Landon, regional sales coordinator, has suggested that Bohlander use  a targeted marketing strategy by placing banner ads on a few gardening websites. Bohlander would pay  for the service based primarily on the number of ad impressions (the number of times the ads are shown).  Using past campaigns as a guide, Sami has prepared the following quarterly estimate for Bohlander.

Banner ad development (6 banners per quarter) . . . . . . . . . . . . . . . . . . . . . . $7,200

Banner ad placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $1.50 per thousand impressions

Estimated ad impressions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000

Banner ad click-throughs $0.60 per click-through

From past experience, Kimland Media estimates that 1% of all viewers will “click through” the banner  ad to Bohlander’s website. Of those viewers who click through, Kimland estimates that 20% will actually make a purchase.

Required

a. What is the expected total cost per quarter of Bohlander’s Internet advertising campaign?

b. Given Sami’s cost estimates, what is Bohlander’s expected cost of acquiring a new customer  through the campaign?

c. Using the information you just calculated, what is the estimated cost to get one more person to  click through and make a purchase?