Modelling impact of advertising and optimizing advertising policy: an application in recreation

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Abstract

This paper deals with the problem of the desirable level of advertising expenditure, the optimal distribution of this expenditure in time and the allocation over the media: TV, radio and newspaper for a recreation park in the Netherlands.

Although the model id developed for the specific situation of this park, in principle it can be applied in all situations where the interest is in short-term (day-by-day) effects of promotional activities on sales. Examples are: other situations in the recreation and leisure business, cultural events (theatre, cinema) and sales promotions (e.g. weekend offerings) for products in supermarkets.

First a model was specified and estimated that relates number of visitors to advertising effort. It also takes into account non-advertising variables that effect the number of visitors.

Then this model was used in a heuristic advertising planning procedure, which by means of incremental analysis, for a given budget level searches for the optimal allocation of the advertising budget over media and time.

With this procedure, ways to readjust the advertising policy were found: by allocating the budget differently over media and time and by changing the overall budget level.

Several recommendations were made to the management of the park, a number of which have already been implemented.

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The author wishes to thank Jaap Bijkerk, Gerard Verwey and Bart Braam for their help in carrying out the computations. Frans de Hey did much exploratory work for this study. Very useful comments on an earlier version of this paper were obtained from Paul van Beek (Wageningen Agricultural University, Dept. of Mathematics), Peter Leeflang (University of Groningen) and an anonymous EJOR-referee.

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