1.(5+5+5 = 15 pt) Ted Anderson is brand manager for the Lynx brand of tennis shoes. He has analyzed five likely magazines for use in advertising the Lynx brand and has collected the following data:
Magazine / Four-Color Page Rate / Total Readers / Readers / ReadersAge 18-34 years / Age 35-49 years
Tennis Today / $27,000 / 1,800,000 / 450,000 / 600,000
Court / $22,500 / 1,500,000 / 400,000 / 500,000
Tennis Pro / $16,200 / 900,000 / 360,000 / 270,000
US Sports / $54,000 / 2,700,000 / 1,200,000 / 600,000
Racquet / $19,800 / 1,200,000 / 300,000 / 450,000
1.(a) Compute the CPM for each of the five magazines based on overall readership. Which magazine has the lowest overall CPM ? (Clearly state your answer. If two or more magazines are tied for the lowest CPM, identify all of them clearly.)
Answer:
Magazine / Four Color Page Rate / Total Readers / CPMTennis Today / $27,000 / 1,800,000
Court / $22,500 / 1,500,000
Tennis Pro / $16,200 / 900,000
US Sports / $54,000 / 2,700,000
Racquet / $19,800 / 1,200,000
Magazine or magazines with lowest CPM:
1.(b) Suppose Mr.Anderson wants to target readers of age 18-34. For this market, compute the CPM for each of the five magazines. Which magazine has the lowest CPM? (Clearly state your answer. If two or more magazines are tied for the lowest CPM, identify all of them clearly.)
Answer:
Magazine / Four Color Page Rate / Readers Age 18-34 Years / CPMTennis Today / $27,000 / 450,000
Court / $22,500 / 400,000
Tennis Pro / $16,200 / 360,000
US Sports / $54,000 / 1,200,000
Racquet / $19,800 / 300,000
Magazine or magazines with lowest CPM:
1.(c) Suppose Mr.Anderson wants to target readers of age 35-49. For this market, compute the CPM for each of the five magazines. Which magazine has the lowest CPM? (Clearly state your answer. If two or more magazines are tied for the lowest CPM, identify all of them clearly.)
Answer:
Magazine / Four Color Page Rate / Readers Age35-49 Years / CPM
Tennis Today / $27,000 / 600,000
Court / $22,500 / 500,000
Tennis Pro / $16,200 / 270,000
US Sports / $54,000 / 600,000
Racquet / $19,800 / 450,000
Magazine or magazines with lowest CPM:
2.(2+2+2 = 6 pt) Suppose a television commercial for the Lynx brand of athletic shoes was broadcast for four weeks during May, 2014. During this time, 15 million people (out of a target audience of 25 million people) were exposed to the commercial and, on the average, each of these people (that is, people who were exposed to the commercial) was exposed to the commercial four times. What were the reach, frequency and GRP of this commercial?
Answer:
Reach =
Frequency =
GRP =
3.(4 pt) (Workload Method) Acme Company has the following accounts:
Category / Number of accounts in category / Frequency of calls needed / Number of calls needed in a year / Length of a callA / 300 / Once in a month / 12 / 2 hours
B / 1200 / Once in 3 months / 4 / 1 hour
An average salesperson works 40 weeks a year, 40 hours a week, and can spend 30% of this time on sales calls (the remainder is spent traveling, preparing reports, arranging delivery, etc.) Compute the number of salespeople Acme needs.
Answer:
Total number of hours of selling time needed in a year for category A customers
=
Total number of hours of selling time needed in a year for category B customers
=
Total combined number of hours of selling time needed in a year
=
Total number of hours of selling time available to one salesperson in a year =
Number of salespeople needed =
4.(5 pt) (Incremental Method) Suppose the marginal cost of adding another salesperson is $75,000, and you have the following information:
Number of Salespeople / Revenue ($1000) / Cost unrelated to Salesforce($1000)
0 / 0 / 0
1 / 240 / 60
2 / 460 / 120
3 / 660 / 180
4 / 840 / 240
5 / 1000 / 300
6 / 1140 / 360
7 / 1260 / 420
8 / 1360 / 480
9 / 1440 / 540
10 / 1500 / 600
Please complete the table given below. From this table, determine the number of salespeople needed using the incremental method.
Answer: First complete the table below.
Number of Salespeople / Revenue ($1000) / Cost unrelated to Salesforce($1000) / Gross Profit ($1000) / Marginal Gross Profit ($1000) / Cost related to Salesforce ($1000) / Marginal Selling Cost ($1000)
0 / 0 / 0
1 / 240 / 60
2 / 460 / 120
3 / 660 / 180
4 / 840 / 240
5 / 1000 / 300
6 / 1140 / 360
7 / 1260 / 420
8 / 1360 / 480
9 / 1440 / 540
10 / 1500 / 600
Number of salespeople needed =
Relevant Information:
1. CPM (cost per thousand) is defined as:
{(Cost of Commercial)/(Number of target customers reached by commercial)} ×1000
2. Reach: Fraction of target customers exposed to the commercial in a specified time period, usually four weeks, multiplied by 100.
For example, if 6 million out of a target population of 15 million are exposed to the commercial, then reach is (6/15) × 100 = 40.
3. Frequency: Consider the members of the target market who are reached by the commercial. The frequency is the average number of times a member of this group is exposed to the commercial in the time period specified. Suppose for example, considering only the people exposed to the commercial in the specified period, one was exposed five times on the average. Then, frequency is 5.
4. Gross Rating Point (GRP): Reach multiplied by frequency.
For example, if reach is 40 and frequency is 5, GRP is 40× 5 = 200.
5. Gross Profit with n salespeople
= Revenue with n salespeople – Cost unrelated to sales-force with n salespeople
6. Marginal gross profit for salesperson number n
= Gross profit with n salespeople – Gross profit with (n-1) salespeople
7. Marginal selling cost for salesperson number n
= Selling cost with n salespeople – Selling cost with (n-1) salespeople
1