Concomm Telecom is a major provider of comprehensive communications services for residential users. It offers a package including local and long-distance telephone, digital cable, Internet, and monitored home security service. Concomm is in the process of building awareness of its brand in selected areas of the southwestern United States. The company plans to spend $22 million to promote awareness and brand image of its comprehensive package of services in the target area. Brand image and awareness are important to Concomm because it is competing with a number of much larger and better financed competitors, including AT&T, Verizon, and Comcast.

In the first year of the brand image campaign, Concomm spent $12 million pursuing the same goals of increasing awareness and brand image. In order to see if the campaign was successful, the company conducted tracking research by telephone. It conducted a pretest before the campaign began and a posttest at the end of the year. The surveys were designed to measure awareness and image of Concomm.
Changes in either measure from the pretest to the posttest were to be attributed to the effects of the ad campaign. No other elements of the marketing strategy were changed during the course of the campaign.

Unaided, or top-of-mind, awareness (“What companies come to mind when you think of companies that provide residential communication services?”) increased from 21 percent in the pretest to 25 percent in the posttest. In the pretest, 42 percent reported having a positive image of Concomm. This figure increased to 44 percent in the posttest. Though both key measures increased, the same sizes for the two tests were relatively small. Random samples of 100 consumers were used for both tests. Sampling error for the measure of awareness at 95.44 percent confidence is ± 8.7 percent. The comparable figure for the image measure is ± 9.9 percent. The value used for P in the formula is the posttest result. With these relatively large sampling errors and the relatively small changes in awareness and image, Concomm could only say with 95.44 percent confidence that awareness in the posttest was 25 percent ± 8.7 percent, or in the range of 16.3 percent to 33.7 percent. In regard to the image measure, it could only say with 95.44 percent confidence that the percentage of consumers with a positive image of Concomm in the posttest was 44 percent ± 9.9 percent, or in the range of 34.1 percent to 53.9 percent. Based on the relatively small changes in awareness and image and the relatively large errors associated with these measures, Concomm could not conclude with any confidence that either measure had actually changed.

The CEO of Concomm is concerned about the amount of money being spent on advertising and wants to know whether the advertising is actually achieving what it is supposed to achieve. She wants a more sensitive test so that a definitive conclusion can be reached regarding the effect of the advertising.

Questions

1. Show how the sampling errors for the posttest measures were calculated.

2. If the CEO wants to have 95.44 percent confidence that the estimates of awareness and positive image are within ± 2 percent of the true value, what is the required sample size?

3. What is the required sample size if the CEO wants to be 99.74 percent confident?

4. If the current budget for conducting telephone interviews is $20,000 and the cost per interview is $19, can Concomm reach the goal specified in question 3? With the $20,000 budget, what error levels can it reach for both measures? What is the budget required to reach the goal set in question 3?