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

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

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.

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Article provided by Northeastern Agricultural and Resource Economics Association in its journal Northeastern Journal of Agricultural and Resource Economics.

Volume (Year): 17 (1988)
Issue (Month): 1 (April)

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Handle: RePEc:ags:nejare:29064
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  1. Gunjal, Kisan R., 1985. "The Effects Of Trade Promotion On Canadian Agricultural Exports," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 14(2), October.
  2. Novakovic, Andrew M., 1986. "Detailed Summary of the Dairy Provisions of the Food Security Act of 1985," EB Series 185828, Cornell University, Department of Applied Economics and Management.
  3. 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.
  4. C. P. Rosson & M. D. Hammig & J. W. Jones, 1986. "Foreign market promotion programs: An analysis of promotion response for apples, poultry, and tobacco," Agribusiness, John Wiley & Sons, Ltd., vol. 2(1), pages 33-42.
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