Assignment
Advertising Effectiveness Case Study The company 'Replay Records' (RR), with headquarters in Montreal, Canada, is also one of the players of the book, periodicals and music store industry. RR started operations in 2013 opening 3 stores in Montreal, 1 store in Vancouver, and 1 store in Edmonton. RR estimated that its defined population in these cities is about 2.5 million. The company retails vintage vinyl and music memorabilia. RR sales reached $3.5 and $3.8 million in 2014 and 2015 respectively.
RR management decided to spend aggressively in offline and online advertising during 2015 in order to bump annual sales, market share, and rate of returns. By and large, RR decided to implement radio, print, outdoor, and online advertising. The company needs to evaluate the effectiveness of advertising activities implemented in 2015 in order to continue or stop spending in those activities during 2016. Sales reached $4.5 million in 2015.
RR Advertising Program 2015
Radio. The cost of the radio campaign was $75,000. The company used three local radio stations in each city. The total number of individuals that the radio campaign may have reached was 50,000. On average each individual was exposed to a radio advertisement 13 times a year. Based on surveys RR administered in its stores, only 19 percent of the defined population who visited a store have listened to a radio advertisement of the company.
Print. The cost of the print campaign was $110,000. The company used four local newspapers and/or magazines of each city. The total number of individuals that the print campaign may have reached was 150,000. On average each individual was exposed to a print advertisement 30 times a year. Based on surveys RR administered in its stores, 16 percent of the defined population who visited a store have seen an RR advertisement either in local newspapers or local magazines.
Outdoor. The cost of the outdoor campaign was $90,000. The company used billboards placed near the stores and in some important avenues/streets of each city. The total number of individuals that the outdoor campaign may have reached was estimated to be 230,000. On average each individual was exposed to an outdoor advertisement 4 times a year. Based on surveys RR administered in its stores, 4 percent of the defined population who visited a store have seen a RR advertisement on billboards.
Online. The cost of the online campaign was $100,000. The company used the following online channels for advertising: its website, online newspapers/magazines, websites of local television channels (e.g. Global Edmonton), Google Adwords, Facebook, Instagram, cultural websites, among others. The total number of individuals that the online campaign may have reached was estimated to be 900,000. On average each individual was exposed to an online advertisement 50 times a year. The total number of clicks on RR's advertisement was approximately 12 million. RR received approximately 200,000 online orders. Based on surveys RR administered in its stores, 24 percent of the defined population who visited a store have seen a RR advertisement online.
RR's website receives approximately 5 million visits a year. Of those visits, 3 million access only a single page.
Task
A. Compute the "number of impressions" and "gross rating points (GRPs)" of all advertising channels RR used in 2015. What advice would you give to RR's management team in regards to the advertising planning for 2016?
B. Compute the "cost per thousand impressions (CPM) rate" of all advertising channels used by RR during 2015. What can you say about the costs of these two media activities? Explain.
C. Compute the "clickthrough rate" of the online advertising campaign of RR in 2015. Interpret the results.
D. Compute the "cost per impression," "cost per click," and "cost per order" of the online advertising campaign of RR in 2015. Explain the results.
E. Compute the effectiveness of RR's website using the "bounce rate". Comment on the rate obtained.
F. What would be your advice to the management of RR in regards to the effectiveness of offline and online advertising?