Derek is working on promoting his company's Glazer brand of electronic razors. The company estimates 50 million potential users and sets a target of attracting 8 percent of the market
Derek hopes to reach 80 percent of the potential customers with an advertising message. He would be pleased if 25 percent of the prospects that were aware, tried the Glazer. According to further estimates, 40 percent of all triers will become loyal users. If the cost of exposing 1 percent of the target population to one impression is $4500 on an average, determine the necessary advertising budget, according to the objective-and-task method.
Using the objective-and-task method, Derek can arrive at the marketing communications budget by following these steps:
1. The company estimates 50 million potential users and sets a target of attracting 8 percent of the market—that is, 4 million users.
2. The percentage of the market that should be reached by advertising is determined. Derek hopes to reach 80 percent (40 million prospects) with his advertising message.
3. The percentage of aware prospects that should be persuaded to try the brand is then calculated. Derek would be pleased if 25 percent of aware prospects (10 million) tried Glazers. He estimates that 40 percent of all triers, or 4 million people, will become loyal users. This is the market goal.
4. Next, the number of advertising impressions per 1 percent trial rate is estimated. Derek estimates that 40 advertising impressions (exposures) for every 1 percent of the population will bring about a 25 percent trial rate.
5. The number of gross rating points that would have to be purchased is now calculated. A gross rating point is one exposure to 1 percent of the target population. Because Derek wants to achieve 40 exposures to 80 percent of the population, he will want to buy 3,200 gross rating points.
6. Finally, the necessary advertising budget on the basis of the average cost of buying a gross rating point is estimated. To expose 1 percent of the target population to one impression costs an average of $4,500. Therefore, 3,200 gross rating points will cost $14,400,000 (= $4,500 × 3,200 ) in the introductory year.
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