Roberta Esteban, manager of market planning for Viral Products of the IAIP PharmaceuticalCo., is responsible for advertising a class of products. She has designed a three-year marketing plan to increase the market share of her product class, which involves a major increase in magazine advertising. She has met with an advertisement agency that has designed a three-year advertising campaign, involving 12 separate advertisements that build on a common theme. Each advertisement will run in three consecutive monthly medical magazines and will then be followed by the next ad in the sequence. Up to five different medical journals will carry the advertising campaign. Direct-mail campaigns and direct-sales promotional material will be designed to follow the theme of the advertisement currently appearing at the time. The following data summarize the cost of the campaign:

The firms normal policy is to budget each year as a separate entity without carrying forward unspent funds. Roberta is requesting that, instead of just approving the budget for next year(labeled Year 1), the entire three-year project be budgeted. This approval would allow her to move forward with her campaign. Also, it would give her the freedom to apply any unspent funds in one year to the next year or to use them in another part of the campaign. Robertaargues that the advertising campaign is an integrated project stretching over three years, and should be either approved or rejected in its entirety. Critically evaluate Robertas request and make a recommendation as to whether a three-year budget should be approved per her proposal. For purposes of your answer, assume that the advertising campaign is expected to be a profitable project.

Year 2 Year 3 Total Year 1 4 4 4 12 Number of advertisements Number of magazines Cost per ad Advertising cost 5 6,000 120,000 5 6,200 124,000 4 6,500 104,000 348,000