According to James O

question 38

Multiple Choice

According to James O. Peckham, which of the following statements provides a good rule of thumb for a company setting the advertising budget for a new product?

• A)Its advertising budget should be twice the desired market share.
• B)Its advertising budget should be equal to that of the largest market shareholder in the product category.
• C)Its advertising budget should be as much as the firm can afford.
• D)Its advertising budget should be ten percent greater than the average budget planned for the entire payout period.
• E)Its advertising budget should be less than that needed to maintain the desired market sharE.After studying more than 40 years of Nielsen figures, James O.Peckham estimated that the average share of advertising to sales ratio necessary to launch a new product successfully is approximately 1.5:2.0.This means that a new entry should be spending at approximately twice the desired market share.

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Definitions:

Breakeven Point

The point at which total cost and total revenue are equal, meaning no net loss or gain, and the business is not making a profit.

Price Ceiling

A government-imposed limit on the price charged for a product, to ensure that it remains affordable for consumers.

Price Floor

A minimum price set by the government or an organization for a particular good or service, below which it cannot be sold.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period, with price on the vertical axis and quantity on the horizontal axis.