The automobile-manufacturing industry has three major domestic producers, one minor and several minuscule domestic producers, and several major foreign producers, each supplying vehicles to the North American market. Advertising and promotional expenditures constitute a large part of the competitive effort in this industry, once the product design and price levels have been determined for each model year. With a major purchase like an automobile, the potential purchaser must feel confident about the quality of the vehicle, the efficacy of after¬ sales seivice, and the future value of the automobile at trade-in time. Advertising campaigns typically stress these factors and are also aimed at reducing postpurchase dissonance and build¬ ing brand loyalty.

Suppose you are the advertising manager of one of the very small domestic auto pro¬ ducers. Your company’s sales have been hovering perilously around one-fortieth of one percent of the entile market. Your advertising budget is $1.5 million, and your projected net profits before taxes are less than $5 million. Your advertising budget represents 10 percent of sales revenue, compared with an industry average of 7.5 percent. Net profits are low, largely because of your relatively short production runs, which do not allow overheads to be amortized over large output levels.

(a) Prepare an argument to convince the marketing vice-president that your advertising budget should be increased. Include counterarguments to his probable objections in your proposal

(b) Outline the information you would want the marketing research department to obtain be¬ fore planning your major campaigns for this year.