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A Consumer Lender Finds the Optimal Level of Investment in Radio Advertising A
consumer lending division asked Whyze Group to apply our business case expertise
to evaluate a marketing campaign it was planning.
One of the riskiest elements of the campaign was a $60,000 investment in
radio advertising. Radio
advertising was new to this division and represented a significant investment
for them. They asked Whyze Group to determine whether the size of the radio buy was
appropriate. We projected how many prospects would be shopping for loans during the
three-month campaign based on historical sales and external economic
data. Media buyers
told us what portion of households in each market would be exposed to our
client�s ads and we estimated the portion that would respond to the ads.
Whyze
Group built a marketing investment model to assess the business case of the
overall marketing campaign.
We collaborated with the chief financial officer to customize a business
case model that included key profit-drivers.
These included the costs of collateral and radio advertising, selling
expenses, anticipated product mix, costs of goods (loans) sold, the anticipated
lift in sales and other factors.
The
initially contemplated $60,000 radio buy would reach only a small minority of
consumers shopping for loans at that time.
A medium level of response would produce only a modest net profit.
By running various scenarios through the model, we concluded that the
division�s profit potential was far higher and its risks increased only
marginally by significantly increasing its radio buy. Four months after the end of the campaign, we measured the results. The division had increased its market share 20% over the previous quarter and generated an additional $1.8 million in net profit before taxes.
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