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Allocation Of Generic Advertising Funds Among Products: A Sales Maximization Approach

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  • Kinnucan, Henry W.
  • Forker, Olan D.

Abstract

With the passage of the Dairy and Tobacco Adjustment Act of 1983, dairy farmer investment in product research, nutrition education, advertising, and promotion in the United States increased from $60 million to $200 million annually. A key decision faced by boards managing these funds is how best to allocate available advertising funds among the various dairy products. In this paper an economic model is developed that shows the allocation of funds among products that would maximize sales in a given market. The model is applied to the New York City market with results suggesting that over the study period diverting funds from fluid milk to cheese advertising would have enhanced milk-equivalent sales in the market by as much as 1.17% or 8.21 million gallons annually. Alternatively, the model suggests that the same sales level could have been achieved with a different allocation of funds resulting in an estimated 14.6% savings in the amount spent advertising the two products.

Suggested Citation

  • Kinnucan, Henry W. & Forker, Olan D., 1988. "Allocation Of Generic Advertising Funds Among Products: A Sales Maximization Approach," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(01), pages 1-8, April.
    • Handle: RePEc:ags:nejare:29064
    DOI: 10.22004/ag.econ.29064
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    References listed on IDEAS

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    5. Ronald W. Ward & William F. McDonald, 1986. "Effectiveness of generic milk advertising: A ten region study," Agribusiness, John Wiley & Sons, Ltd., vol. 2(1), pages 77-89.
    6. Kinnucan, Henry W., 1986. "Demographic Versus Media Advertising Effects On Milk Demand: The Case Of The New York City Market," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 15(01), pages 1-9, April.
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    Cited by:

    1. Suzuki, Nobuhiro & Kaiser, Harry M. & Lenz, John E. & Forker, Olan D., 1994. "An Analysis of U.S. Dairy Policy Deregulation using an Imperfect Competition Model," Agricultural and Resource Economics Review, Cambridge University Press, vol. 23(1), pages 84-93, April.
    2. Suzuki, Nobuhiro & Kaiser, Harry M. & Lenz, John E. & Forker, Olan D., 1993. "Evaluating U.S. Generic Milk Advertising Effectiveness Using An Imperfect Competition Model," Research Bulletins 123015, Cornell University, Department of Applied Economics and Management.
    3. Capps, Oral & Park, Jaehong, 2002. "Impacts of Advertising, Attitudes, Lifestyles, and Health on the Demand for U.S. Pork: A Micro-Level Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(1), pages 1-15, April.

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