Demand factor Direct advertising
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).
Scenario 12C1 - Test 1 - All products, all markets (1 period)
Rows on the chart represent products and markets. Vertical - the relative market change compared with test company. Horizontal - the absolute value of direct advertising. Basic decision for test was direct advertising - 30. Chart displays the results from 30 test groups.
Scenario 12C1 - Test 2 - Product 1, all markets (1 period)
Points lie on trend, the difference between groups is insignificant, indicating that there is almost no affect on direct advertisement by competitors. Dependence directly proportional with coefficient 0.0056 - the relative change in sales % when direct advertising is changed by 1 unit.
Direct advertising has a cumulative effect similar to corporate advertising, but less. Only 30% of direct advertising in previous period continues to act in the current period. It can be presented as if in the current period you add to your direct advertising plus 30% of investments from the previous period. Cumulative effect lasts for 1 or 2 periods.
Scenario 12C1 - Test 3 - Product 1, all markets (2 period)
Blue row on the chart - relative market change in 1 period. Red row - relative market change in 2 period. You can see gradual strengthening effect for large values of direct advertising and smooth weakening effect for low values.
Scenario 12C3 - Test 4 - Product 1, all markets (1 period)
On scenario 12C3 in 1 period, the elasticity for product 1 is equal to 0.0055 and practically coincides with the coefficient 0.0056 on scenario 12C1. This slight difference indicates a lack of competition for influence of this factor.
Scenario 12C3 - Test 5 - Product 2, all markets (1 period)
In the 1 period for product 2 not all points lie on trend, but data sample is small and not all tests were perfect, the elasticity is 0.0059
Scenario 12C3 - Test 6 - Product 3, all markets (1 period)
Similar test for the product 3, the range of direct advertising is 10-40.
According to scenario 12C3 tests (6 groups), elasticity of each product is very close to the reference tests on scenario 12C1. Analysis was made with small range of variation of the direct advertising (10-60 and 10-40) for product 2 and product 3, so we can make a conclution that the elasticity of sales for all markets, products and both scenarios is 0.0056.
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.
The residual effect is 30%.
Directly proportional dependence.
Effect is equal for all markets and products.
Small influence of competitors.