Measuring Advertising Effectiveness (Reach, Frequency, and Revenue per Ad Dollar) Grazyna owns a restaurant in Bozeman, Montana, called the Bluehorn Buffalo Diner. Her restaurant is very popular among Californian Sacramento residents who visit her town and restaurant in large numbers during the summer. With the recent expansion and remodeling of her restaurant, she has decided to run television ads in Sacramento during the winter to promote her renewed restaurant. So, she contacted you because of your position as the television advertising salesperson of a main TV channel in Sacramento. Grazyna wants to know whether her restaurants campaign would be more effective being broadcasted on a news program, sit com, or talk show. You answered that she needs to consider three variables: reach, frequency, and revenue per ad dollar. Using Skype, you gave a PowerPoint sales presentation explaining the variables and corresponding concepts in relation to the three campaigns that Grazyna requested. You said that: Reach and frequency are terms typically used when planning an advertising campaign. Reach is the number of people who are exposed at least once to an advertising message over a specific period of time, usually four weeks. Frequency is the number of times a person is subjected to an advertising message over a certain interval of time. You added that it is important to determine which is more effective, to touch 100 viewers once or 25 viewers four times? Impressions refer to the total number of exposures to your advertisement (i.e., reach multiplied by frequency). The media cost is the price you pay the TV channel to broadcast your advertisement. The target market is the total number of people who could potentially be exposed to your advertisement. The rating is a number, ranging between 0 and 100, that corresponds to the amount of estimated viewers of a particular television program (or, the target market size reached by a campaign when it is broadcasted on a local TV program). These data are sourced from surveys or research companies such as Nielsen. Using the data below, you worked with Grazyna to calculate the revenue per ad dollar of the three TV campaigns being broadcast to Sacramento viewers during various programs. Television Campaign: Local News Program Number of Spots: 5 Rate (Ad Cost per Spot): $80,000 Target Market (Sacramento, CA): 466,488 Rating (Obtained from Nielsen Data): 3.8 Revenue per Impression (Obtained from Company Data): $65 Television Campaign: Local Sitcom Number of Spots: 8 Rate: $35,000 Target Market: 466,488 Rating (Obtained from Nielsen Data): 2.5 Revenue per Impression: $45 Television Campaign: Local Talk Show Number of Spots: 10 Rate: $15,000 Target Market: 466,488 Rating (Obtained from Nielsen Data): 1.6 Revenue per Impression: $25 ABCD 1 2 3 4 5 6 7 8 9 10 11 Component News Program Sitcom Talk Show Frequency (No. of Spots) Rate Media Cost (Frequency x Rate) Target Market Rating Reach (Target Market x Rating) / 100 Impressions (Reach x Frequency) Revenue Per Impression Total Revenue (Impressions x Revenue per Impression) Revenue per Ad Dollar (Total Revenue / Media Cost) 1. What is the media cost of each of the three campaigns? Local News Program: $420,000 $400,000 $380,000 $370,000 Sitcom: $280,000 $310,000 $250,000 $270,000 Talk Show: $175,000 $135,000 $150,000 $155,000 2. What is the reach of each of the three TV campaigns? Local News Program: 17,727 17,714 17,777 17,735 Sitcom: 11,626 11,688 11,662 11,674 Talk Show: 7,644 7,662 7,464 7,410 3. What are the impressions of each of the three TV campaigns? Local News Program: 88,764 88,635 88,630 88,645 Sitcom: 93,296 96,297 95,198 93,982 Talk Show: 74,640 74,368 76,438 76,832 4. What is the revenue per ad dollar of each of the three TV campaigns? Local News Program: $13 $16 $14 $12 Sitcom: $14 $15 $18 $16 Talk Show: $9 $12 $11 $10 5. You also explained to Grazyna the example of a company that generates $1,000 for every $500 invested in a TV campaign has a revenue per ad dollar of 2. If it generates $10,000 for every $1,000 invested in another TV campaign, then it has a revenue per ad dollar of 10. Which of Grazynas TV campaigns is the most effective? News Program TV Campaign Sitcom TV Campaign Talk Show TV Campaign