Calculate Expected Costs: Bohlander Botanicals Develops Hy
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Calculate expected costs Bohlander Botanicals develops hybrid tea roses. A relative newcomer to the field, Bohlander is looking for innovative ways to advertise its products to potential customers. Rose Mayfield, sales manager and avid online shopper, wonders about advertising the company’s roses on various gardening websites. She has contacted Kimland Media, Inc., an advertising firm specializing in Internet advertising campaigns, to explore some options. After meeting with Rose, Sami Landon, regional sales coordinator, has suggested that Bohlander use a targeted marketing strategy by placing banner ads on a few gardening websites.
Bohlander would pay for the service based primarily on the number of ad impressions (the number of times the ads are shown). Using past campaigns as a guide, Sami has prepared the following quarterly estimate for Bohlander:
- Banner ad development (6 banners per quarter): $7,200
- Banner ad placement: $1.50 per thousand impressions
- Estimated ad impressions: 1,000,000
- Banner ad click-throughs: $0.60 per click-through
From past experience, Kimland Media estimates that 1% of all viewers will “click through” the banner ad to Bohlander’s website. Of those viewers who click through, Kimland estimates that 20% will actually make a purchase.
Paper For Above instruction
Expected marketing costs and their implications for Bohlander Botanicals’ advertising strategy
Introduction
Bohlander Botanicals, a newcomer in the hybrid tea roses market, aims to expand its customer base through targeted internet advertising. By leveraging banner ads on gardening websites, the company seeks to increase brand awareness, attract potential customers, and ultimately drive sales. This paper evaluates the expected costs associated with this advertising approach, the cost per new customer acquisition, and the cost to incentivize an additional purchase via ad engagement. Analyzing these factors provides insight into the cost-effectiveness and strategic viability of Bohlander's proposed marketing campaign.
Expected Total Cost of the Campaign
The quarterly anticipated expenditure for Bohlander’s online advertising campaign includes both fixed and variable costs. The fixed component is the development of advertising banners, which amounts to $7,200 for six banners per quarter. The variable costs encompass placement fees, based on impressions, and click-through charges for engaging potential customers.
Calculation of the advertisement placement costs involves multiplying the estimated impressions by the cost per thousand impressions:
Cost of placement = (1,000,000 impressions / 1,000) * $1.50 = $1,500
The expected number of click-throughs is derived from the proportion of viewers clicking the ad:
Click-throughs = 1% of 1,000,000 = 10,000
The total click-through cost then becomes:
Click-through cost = 10,000 * $0.60 = $6,000
The total expected quarterly cost for the campaign combines banner development, placement, and click-through expenses:
Total cost = $7,200 + $1,500 + $6,000 = $14,700
Expected Cost of Acquiring a New Customer
Kimland Media estimates that 20% of visitors who click through the ad will make a purchase. Therefore, the expected number of buyers from 10,000 clicks is:
Expected buyers = 20% of 10,000 = 2,000
The cost associated with acquiring a single customer is then calculated by dividing total advertising costs by the expected number of purchasers:
Cost per customer = $14,700 / 2,000 = $7.35
Cost to Get One More Person to Click and Make a Purchase
To determine the cost of inciting an additional purchase via one more click, we examine the incremental cost associated with an additional click that results in a transaction. Since each click costs $0.60 and the conversion rate is 20%, the cost per purchase from an extra click is:
Cost per purchase from one additional click = $0.60 / 20% = $3.00
This indicates that each additional click has a variable cost of $0.60, but the effective cost for a conversion from that click is $3.00 due to the conversion rate.
Conclusion
In summary, the expected total quarterly expenditure for Bohlander’s Internet advertising is approximately $14,700. The average cost of acquiring a new customer is estimated at $7.35, making the campaign potentially cost-efficient depending on the profit margins per sale. The incremental cost to motivate one more purchase, in terms of ad engagement, is approximately $3.00 if considering the conversion rate. These calculations assist Bohlander in assessing the financial viability of their targeted online marketing efforts and guide strategic decision-making regarding advertising investments.
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