Helen Troy, owner of three Sound Haus stereo equipment stores, is deciding what message channel (advertising medium) to use to promote her newest store. Her current promotion blend includes direct-mail ads that are effective for reaching her current customers. She also has knowledgeable salespeople who work well with consumers once they're in the store. However, a key objective in opening a new store is to attract new customers. Her best prospects are professionals in the age range with incomes over $38.000 a yearBut only some of the people in this group are audiophiles who want the top-of-the-line brands she carries. Troy has decided to use local advertising to reach new customers. Troy narrowed her choice to two advertising media: Pandora, a music streaming service that offers localized advertising services, and a biweekly magazine that focuses on entertainment in her city. Many of the magazine's readers are out-of-town visitors interested in concerts, plays, and restaurants. They usually buy stereo equipment at home. But the magazine's audience research shows that many local professionals do subscribe to the magazine. Troy doesn't think that the objective can be achieved with a single ad. However, she believes that ads in six issues will generate good local awareness with her target marketIn addition, the magazine's color format will let her present the prestige image she wants to convey in an adShe thinks that will help convert aware prospects to buyers. Specialists at a local advertising agency will prepare a high-impact ad for $2,000, and then Troy will pay for the magazine space. Pandora can target an audience similar to Troy's own target marketShe knows repeated ads will be needed to be sure that most of her target audience is exposed to her adsTroy thinks it will take daily ads for several months to create adequate awareness among her target market. Pandora will provide an announcer and prepare a recording of Troy^ prime s ad for a one-time fee of $200. All she has to do is tell them what the message content for the ad should say Both Pandora and the magazine gave Troy reports summarizing recent audience research. She decides that comparing the two media in a spreadsheet will help her make a better decision.

a. Based on the data displayed on the initial spreadsheet, which message channel (advertising medium) would you recommend to Troy?

• Pandora

• Magazine

• Both have roughly the same cost per buyer

b. The agency that offered to prepare Troys magazine ad will prepare a fully produced Pandora adincluding a musical jinglefor $2,500. The agency claims that its musical ad will have much more impact than the ad Pandora will create. The agency says its ad should produce the same results as the Pandora ad with 20 percent fewer insertions. If the agency claim is correct, would it be wise for Troy to pay the agency to produce the ad?

• Yes, the agency ad is more cost effective

• No, the agency ad will be less cost effective

• The cost per buyer is roughly the same regardless of who makes the

c. Troy wonders if it would make sense to run the ads longer in order to get even higher awareness. She estimates that the percent of prospects aware can increase from 80% to 95% if she pays for 30% more insertions. Would this be a good decision?

• Yes, if she uses Pandora

• Yes, if she uses the magazine

• Yes, it will be better no matter which option she pursues

• No, it will be worse no matter which option she pursues

d. The agency will not guarantee that its custom-produced Pandora ad will reach Troys objectivemaking 80 percent of the prospects aware of the new store. Troy wants to see how lower levels of awareness would affect the advertising cost per buyer and the cost per aware prospect. Use the spreadsheet to model what would happen if awareness was only 70% (assuming the original number of insertions). What would the Pandora cost per buyer be?

• $8.65

• $10.42

• $13.68

• $14.59

• $17.06

e. Continuing the previous exercise, what would the cost per buyer be if awareness was only 50%?

• $8.65

• $10.42

• $13.68

• $14.59

• $17.06

only need answers to D. and E.

5. B D E F 1 Initial Initial 2 Pandora Magazine 3 Pandora 100,000 70% 95% 66,500 200.00 Magazine 200,000 60% 65% 78,000 S 2,000.00 1,800.00 80% $ 3 Total Audience Size (People) 4 Audience % in Income/Age Group 5% of Audience Local Residents 6 Number of "Prospects" in Audience 7 Preparation Cost for Ad 8 Cost of One Ad "Insertion" 9 Objective: % of Prospects Aware 10 Insertions Needed to Achieve Objective 11 Total Cost for All Ads 12 Number of "Aware" Prospects 13 Cost per Aware Prospect 14 % of Aware Who Will Buy 15 Likely Number of Buyers 16 Cost per Buyer 150.00 80% 60 $ 6 12,800.00 62,400 0.205 $ 9,200.00 53,200 0.173 $ 2.00% 1.064 8.65 $ 1.50% 936 13.68 $