# Demand factor - Direct advertising

02.12.2014

Impact of direct advertising on market is different from corporate advertising. It has less cumulative effect, but affect acts immediately in the current period. Impact of direct advertising on sales does not depend on the type of product or market, the dependence is identical for all cells of the matrix of demand (3x3).

**Elasticity of demand from direct advertising in 1 period**

The dots on the graph indicate the change in demand for each market and product, depending on direct advertising. Vertically, the relative change in demand. Horizontal is the absolute value of direct advertising. The points on the graph with the demand value of 1.000 correspond to the decision of the test team with direct advertising 30. The graph shows the results from 9 test groups.

All points lie on the linear trend line, the difference between the groups is insignificant, which corresponds to the fact that direct advertising practically does not depend on the influence of competitors, market and product. Dependence of demand on direct advertising is proportional with a coefficient of 0.56% - relative change in demand in % when advertising changes by 1.

**Cumulative effect of direct advertising on demand in period 2**

Let's estimate the cumulative effect of direct advertising on demand in the 2 period. All teams from 9 test groups make the same direct advertising decision in period 2, as in period 1.

The graph shows an increase in the effect for large values of direct advertising and a weakening of the effect for low values. It can be concluded that direct advertising has a cumulative effect similar to corporate advertising, but much weaker. Only about 30% of period 1 direct advertising investments continue to work in period 2. It can be imagined as if 30% of investments in period 1 were added to investments in direct advertising in period 2.

The optimal strategy is using direct advertising budget distribution according to the planned sales of each product. This will enable the best use of investments in marketing. More detailed information of direct advertising will be represented later in the typical strategy examples.

**Hints**

- Residual effect on demand from direct advertising is 30%
- The dependence of demand on direct advertising is expressed by a linear function
- Effect on demand from direct advertising equality for all markets and products
- Demand from direct advertising is not influenced by competitors in the group

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