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# Demand factor - Corporate advertising

21.11.2014

Corporate advertising effects on market very long period of time, but does not effect on sales immediately. Also, corporate advertising has a strong cumulative effect, so the strategy of investments should be planned for all 5 periods. Effect on sales is different for each market. The greatest effect will be in the Internet. EU and Nafta have the same effect, but is less than in the Internet.

It is important to remember that the effect of your investment comes after the period. If you spent 99 on corporate advertising in the Internet in 1 period, effect on sales you will get only in 2 period. That is why spending money on corporate advertising in the 5 period does not make sense, it would not effect on market at all.

Elasticity of demand from corporate advertising in 1 period

Vertical - relative market change compared with 1 period. Horizontally - absolute value of corporate advertising. Corporate advertising affects the demand in the 1 period only in Internet, but not significantly.

Elasticity of demand from corporate advertising in 2 period

Vertical - relative market change compared with 1 period. Horizontally - absolute value of corporate advertising. Results for EU and Nafta, reference points are the same, therefore the effect on sales are equal for both markets.

Corporate advertising has a strong cumulative effect, which is equal to 60% of previous investments. The difference between sales in EU and Nafta can be calculated by the formula:

1. 2 period - (80-50) * 0.0014
2. 3 period - (80-50) * 0.0014 + (80-50) * 0.0014 * 0.6
3. 4 period - (80-50) * 0.0014 + (80-50) * 0.0014 * 0.6 + (80-50) * 0.0014 * 0.6 * 0.6

These specific features form strategy of investment in corporate advertising. You should maximize advertising budget at the beginning of the game for the market with great potential for growth, but gradually reduce it to 5 period:

1. 1 period - 99
2. 2 period - 99
3. 3 period - 75
4. 4 period - 50
5. 5 period - 0

Hints

1. Residual effect on demand from corporate advertising is 60%
2. Dependence of demand on corporate advertising is expressed by a linear function
3. Effect on demand from corporate advertising is equal for products within the market
4. Dependence of demand on corporate advertising is not influenced by competitors in the group

Automatic demand forecast based on corporate advertising is built into the Calculation model, which can be purchased in our store.