GB531 Unit 7 Budget Allocation Model Example

Even, Burst or Burst With a Pulse: A Unit 7 Budget Allocation Model for $850,000 of Working Media

[Student Name]

Purdue University Global

GB531: Advertising

Unit 7 Budget Allocation Model

[Instructor Name]

[Date]

The battery brand, its budget and every figure are composite and illustrative; the methods and sources cited are real.

Step 1: Splitting the Budget Across Markets

Working media is divided by each market's target adults, from the media universe in Unit 4, multiplied by an outage index that reflects how long outages typically last there, with Houston set at 1.00.

Houston: about 980,000 target adults; index 1.00; share about 50.9 percent; about $432,600; about $0.44 per target adult.

Tampa-St. Petersburg: about 550,000; index 1.13; share about 32.3 percent; about $274,400; about $0.50 per target adult.

New Orleans: about 240,000; index 1.35; share about 16.8 percent; about $143,000; about $0.60 per target adult, the highest, because outages there have lasted longest and the fuel problem is most familiar.

The outage index adds weight where the message matters most, without abandoning the largest market. Jones (1995) argued that advertising's short-term effects depend heavily on reaching people when the message is relevant to them, and the index is a simple way to put relevance into the split.

Step 2: Holding Mail and Search

In each market, 10 percent of working media is held for direct mail to homeowners in the message audience, and 10 percent for paid search, which captures homeowners already looking for backup power. The remaining 80 percent, about $346,100 in Houston, goes to television, connected TV, streaming audio and weather pages, as set out in the media plan.

Step 3: Three Schedules for Houston

At a blended cost of about $618 a target rating point, $346,100 buys about 560 target rating points in Houston. The question is how to spread them.

Schedule A, even spread over eighteen weeks: about 31 points a week. In any four-week window, about 125 points, reaching about 16 percent of the universe three or more times.

Schedule B, a single six-week burst from late May: 560 points in six weeks. In a four-week window inside the burst, about 69 percent reached three or more times, but nothing after early July.

Schedule C, a six-week burst of 459 points plus a two-week August pulse of about 100 points: in a four-week window inside the burst, about 59 percent reached three or more times; during the pulse, about 60 percent reached at least once, refreshing the message at the peak of the season.

Spreading money evenly feels cautious, but it buys a schedule that almost no one sees often enough to remember.

The estimates use a simple model that assumes exposures are spread at random among the homeowners each vehicle can reach. Real schedules concentrate exposures among heavier viewers, so actual effective reach will be somewhat lower in each case, but the ranking of the three schedules holds.

Testing the Split Itself

The market split was also tested. Allocating purely by target adults, with no outage index, would give New Orleans about 13.6 percent rather than 16.8 percent, about $27,300 less. Allocating purely by outage risk would starve Houston, which holds more than half of the target homeowners. Sharp (2010) cautions against concentrating spending on the most responsive buyers at the cost of broad reach, because growth usually comes from many lighter buyers. The index is therefore kept modest, raising New Orleans' share without cutting Houston's coverage below what its schedule needs.

Why Schedule C

Schedule B reaches the most people often enough in its window, but it stops just as the Atlantic hurricane season moves toward its usual peak in August and September. Schedule C gives up some frequency in the burst to keep the brand present in August, when storm forecasts lead homeowners to think about backup power and when the measurement plan's comparison of markets can still capture late effects.

Krugman (1972) suggested that about three exposures allow a message to be understood and acted on, which supports concentrating enough weight in the burst to reach that level for most of the universe. The pulse then works as a reminder rather than as a new campaign.

The Allocation in Full

Houston: burst about $283,500, pulse about $62,600, mail about $43,300, search about $43,300.

Tampa-St. Petersburg: about $219,500 for burst and pulse in the same proportions, mail and search about $27,400 each.

New Orleans: about $114,400 for burst and pulse, mail and search about $14,300 each.

Total: $850,000.

How the Model Will Be Used During the Season

The model is a planning tool, and the season will not follow the plan exactly. Each week, delivered target rating points should be compared with the schedule by market and vehicle. If a market falls more than 10 percent behind, money should move from vehicles that are over-delivering. If an early named storm makes August less relevant because homeowners have already acted, part of the pulse could move into search, which captures homeowners at the moment they look for a quote.

What the Model Assumes

The model treats the outage index as stable and the cost per point as fixed. A major storm during the burst could raise local news costs and pause television, and the plan should hold a small contingency, about 5 percent of each market's broadcast budget, for that case.

References

Jones, J. P. (1995). When ads work: New proof that advertising triggers sales. Lexington Books.

Krugman, H. E. (1972). Why three exposures may be enough. Journal of Advertising Research, 12(6), 11-14.

Sharp, B. (2010). How brands grow: What marketers don't know. Oxford University Press.