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Ethical Considerations And Financial Implications Of Internet Advertising Campaigns: A Case Study Of Helios Botanicals

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    Ethical Considerations and Financial Implications of Internet Advertising Campaigns: A Case Study of Helios Botanicals 2 ‐ 23 Calculate expected costs (LO 1 ) Helios Botanicals develops hybrid tea roses. A relative newcomer to the field, Helios 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 Helios use a targeted marketing strategy by placing banner ads on a few gardening websites. Helios 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 Helios. Banner ad development (5 banners per quarter) $5,000 Banner ad placement $0.80 per thousand impressions Estimated ad impressions 2,000,000 Banner ad click ‐ throughs $0.02 per click ‐ through From past experience, Kimland Media estimates that 10% of all viewers will “click through” the banner ad to Helios's website. Of those viewers who click through, Kimland estimates that 5% will actually make a purchase. Required a. What is the expected total cost per quarter of Helios's Internet advertising campaign? b. Given Sami's cost estimates, what is Helios's expected cost of acquiring a new customer through the campaign? c. Using the information you just calculated, what is the estimated cost to get one more person to click through and make a purchase? Answer: Let's break this down step by step to answer the questions. Part A: Expected Total Cost per Quarter of Helios's Internet Advertising Campaign The total cost will consist of: 1. Banner ad development cost : A fixed cost of $5,000 for the development of 5 banners per quarter. 2. Banner ad placement cost : This is based on the number of impressions (ad views) and is priced at $0.80 per thousand impressions. 3. Banner ad click - through cost : This is based on the number of click - throughs (people who click on the ad), with a cost of $0.02 per click - through. Step 1: Banner Ad Development Cost • Development cost = $5,000 (fixed per quarter) Step 2: Banner Ad Placement Cost • The placement cost is $0.80 per thousand impressions, and the estimated number of impressions is 2,000,000. • Impressions cost = (2,000,000 / 1,000) * $0.80 = $1,600 Step 3: Banner Ad Click - Through Cost • 10% of viewers will click through, so 10% of 2,000,000 impressions = 200,000 click - throughs.

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