The marketing manager of a hotel chain is considering putting an advertisement in a magazine. How would they analyze it?

Facts:

Average Room Rate = $149/night

Room Cost = $23.00

Fortune Small Business Magazine

Circ = 1,000,000

Circ cost: $65/M: $65 x 1,0000 = $65,000

Production cost for ad = $25,000

Questions to answer:

1. What is the breakeven*?
A) room sales (units)
B) response rate
2. What is Cost per Response?
3. What would the profit or loss be?
4. Would you recommend this to your boss (B2B Resp Rate .79%)?

*Breakeven: The number of units that need to be sold to cover the marketing costs.

(Please use Excel if possible)