Draft TV Commercials Question 1 What do we know?

budget is fixed budget must be spent on drafts or on airing quality of commercials is uncertain What can we assume? any number of drafts can be commissioned the quality of different drafts is independent (in probability) What could the results look like? graph of profit as a function of number of drafts graph of retained impressions as a function of number of drafts optimal number of drafts marginal value of one draft more or less What information can be brought to bear? distribution of retained impressions for other commercials What can we ask the client? how variable is the quality of draft commercials? how accurately can a trial audience determine the ultimate quality of a commercial (retained impressions)? does variability in commercial quality vary by product category? Similar situations or problems? sampling from populations with variability optimal stopping problems Question 2 Problem statements: In what ways could? we maximize retained impressions we maximize profit we identify a robust strategy. Question 3 Decisions number of draft commercials Objectives total retained impressions retained impressions per dollar spent profit Constraints budget

Question 4 Distribution of Ad Quality Retained Impressions/ Dollar

Number of Drafts Retained Impressions Budget

Cost/Draft Ad

Question 5 Ways to simplify ignore details of advertising campaign (e.g., media split, frequency of airings, and so on) Question 6 Modules quality of ad chosen from multiple drafts retained impressions Question 7 Key relationships actual and perceived ad quality differ by a random error Question 8 Parameters variance of commercial quality error in perceptions of commercial quality percentage difference between next day recall and retained impressions