LONG DISTANCE TELEPHONE SERVICE ADVERTISING CHOICES

1
LONG DISTANCE TELEPHONE SERVICE ADVERTISING
CHOICES
Your team plans and implements marketing for a
leading provider of long distance services. Each
month, you make decisions regarding the
advertising strategy that you will use. As you
know, this industry is crowded with contenders
for market share. You may choose from two
general marketing approaches highlight your
companys positive attributes, or advertise
negative aspects of your leading competitors
service. Your primary competitor also makes this
ongoing choice. If both of you avoid negative
advertising, both companies net about 1 million
each period. However, if one company runs
negative ads while the other does not, the
company that advertises gains 2 million and the
company that does not run negative ads loses 3
million. If both companies run negative ads,
both of them lose 2 million to other long
distance providers. Because people tend to
make more calls in some months than in others,
the profit and loss values resulting from
advertising decisions are doubled in September
and quadrupled in December. Further, there is a
trade show in September, at which one of your
team members may talk with a representative of
the other marketing team. Your companys
fiscal calendar ends in June, so we begin then.
The following table summarizes payoff
possibilities.
Run neg. ads? Yes/no No/yes Yes/yes No/no
Payoffs 2/-3 -3/2 -2/-2 1/1
2
Following initial consultation with team members,
you will have three minutes to decide whether or
not to run negative ads in each time period.
CheapChat and TeleTalk representatives will have
five minutes to meet at the trade show. You may
record your decisions, profits, and/or losses
below.
Date/Event CheapChat ad TeleTalk ad CheapChat TeleTalk
July ads Y N Y N
August ads Y N Y N
September ads (payoff x 2) Y N Y N
Trade Show -- -- -- --
October ads Y N Y N
November ads Y N Y N
December ads (payoff x 4) Y N Y N
Total profit/loss