The Effect Of Advertising Weight On Sales Of A Product

900 WordsDec 8, 20164 Pages
1 Summary This report describes in detail the model that has been developed, with the aim to investigate the effect of advertising weight on sales of a product which subsequently reflects the changes on profit of the company. The report also explains the mechanism of the model in addressing the concern of the Marketing Director regarding the feasibility and profitability of increasing sales by 100%. 2 Introduction and General Assumptions 2.1 Experimental Coverage It is assumed in this model that there are only 15 terrestrial broadcast television areas in the whole country and that the experiment covers the entire area of the country. 2.2 Equal Sales Arising from Each Area Sales in standardised units are recalculated to the real sales volume in 2015 (Appendix 1, Column F). To obtain an unbiased and comparable result, total sales in each region are assumed to be equal, hence sales arising from each area in 2014 is £26,024/15 = £1,734.93, and this figure will be adjusted according to the percentage change to obtain sales figures in 2015. 2.3 Cost Our model considers only the cost incurred by advertisement and ignores all other costs for calculation purposes. That is, Total profit = Profit contribution of sales - Media cost. 2.4 Allocation of Resources The total of advertising weight of the 15 areas in 2015 is 1500 standardized units, which is the same in 2014 (15 areas x 100 base units = 1500 units), thus suggesting that the total resources spent on advertising is the
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