IndexMarketingAdvertisingAdidasNikeConclusionWherever we go out or stay at home watching TV alone, our life is always open to advertising. Due to the numerous advertisements that appear before your eyes a couple of times while watching TV, people might feel so bored to watch them again and again. However, even if they want to move away from advertising, this is inevitable. This is because in the 21st century market, even mega companies like Samsung and Apple cannot survive in the competition without letting consumers know about their new products. However, who knows how advertising shifts consumers' willingness to purchase their products? Are there specific measurements or methods to accurately represent the practicality and intensity of the marketing strategy? In this project, our group mainly focused on indicating the method that can accurately measure the efficiency and intensity of the marketing strategy using formulas such as Lerner Index and Vidale and Wolfe Advertising Model. So, we used two large sports companies, Nike and Adidas, as a model and compared their efficiency in their advertising power. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original EssayMarketingMarketing is defined as “the management process by which goods and services move from concept to customer.” In other words, marketing is a fundamental activity for the functioning of an economy. Marketing aims to respond to needs and desires through exchange. Unlike its stereotype, marketing is not exclusively about selling. Rather, final marketing is that which does not require promotion or sales. Various variables make up a marketing environment. Laws, natural disasters, producers of substitute goods, etc. they are among the many forces that can affect profits. The marketing mix refers to the impacts that companies are able to manage to effectively market their products. The marketing mix is ​​divided into four groups called “The Four Ps of Marketing”: product, price, place and promotion. Product refers to the good and price refers to the amount at which the good is charged. Place is how the good will reach consumers while promotion is how awareness of the product is increased. There is also a questionable fifth P, positioning. Positioning concerns how a product is perceived by the consumer. For example, Pizza Hut manages its four Ps effectively. Its product is moderately priced pizza. The right place for Pizza Hut is Pizza Hut stores in over 70 countries and delivery service. Promotion is diverse for this multinational company with TV, radio, Internet, etc. all used to demonstrate that Pizza Hut pizzas are safe and delicious. Advertising Advertising is a form of promotion in marketing. It is defined as “the act of calling the public's attention to one's product”. Advertising proves crucial to the survival of businesses because they must compete for consumers. Advertising comes in various forms. A look at everyday life gives you an idea of ​​the many ways companies try to reach you and how desperate they are to take control of their market. While all businesses know that advertising is vital, the biggest question for businesses is how to advertise effectively. John Wanamaker said, “Half the money I spend on advertising is wasted; the trouble is that I don't know which half." Over the years, several methods have been applied to allocate the wasted half. TheDorfman-Steiner theorem in 1954 successfully measures the intensity of advertising. This neoclassical economic theorem establishes a simple equation. A/S=e_A/eA stands for advertising expenses while S means sales. e_A and e denote the advertising cost and price elasticity of demand, respectively. Simply put, the higher the elasticity, the degree of sensitivity, the advertising elasticity of demand and the marginal cost of production, the higher the level of advertising. This equation is also called the “Dorfman-Steiner condition”. Using the Lerner Index, we can draw further conclusions about the Dorfman-Steiner condition.LI=(Pc)/P=1/|e_D |The Lerner Index, as shown above, measures a company's market power. LI stands for the Lerner index value. P symbolizes the market price of a firm's products while c is the marginal cost that the firm charges for each product. The Lerner Index has a range between 0 and 1. Higher values ​​translate into higher levels of market power. A firm with a Lerner Index value of 1 would be considered a monopoly while an institution with a Lerner Index value close to 0 would be an extremely fragile firm. By applying the Lerner index to the Dorfman-Steiner condition, we can also state: A/ S=e_A LIThree conclusions can be drawn. First, it is confirmed that advertising intensity and market power have a positive correlation. Second, companies with the ability to quickly react to sales through advertising will have more intense advertising. Finally, if both the advertising elasticity of demand and the price elasticity of demand are similar, then one can also expect similarity in advertising. The Dorfman-Steiner model showed a rough model of how advertising works. However, advertising was assumed to have a consistent positive effect on sales, just as the linear equation suggests. This assumption is clearly not true. As many will know from personal experience, ads become ineffective after a certain period of time. These two graphs show how the ads perform. The graph on the left is a graph of the impact of advertising over time. This is called advertising lag. The graph on the right is the advertising saturation graph showing that sales level off as advertising intensity measured in gross rating points (GRPs). In 1957, Vidale and Wolfe further expanded this relationship between sales and advertising. The relationship is shown in the following equation:(s(t)) ?=?μ(1-(s(t))/M)-ks(t) (s(0)=s_0)s(t) represents the sales function. µ embodies the advertising budget and ? it is a coefficient that measures the effect of advertising on new markets. M is the sales intensity threshold. k is the decay constant. This equation is the direct relationship between advertising and demand. All in all, advertising can be summarized as an action to maximize sales profits. Dorfman, Steiner, Vidale, and Wolfe offer a closer look at exactly how advertising works with the bottom line. With this foundation, determining the winner of the World Cup advertising battle between Nike and Adidas will be much easier. Adidas Adidas is a German multinational company specializing in shoes, clothing and accessories. It is currently the second largest sportswear manufacturer in the world, behind Nike. However, the company founded by Adolf Dassier has grown from a small business in 1948 to a gigantic group that currently owns Reebok and TaylorMade. The iconic three parallel bars have established themselves as one of the most recognized brands in the world. Adidas' marketing strategy manages to attract a wide range ofcustomers and to maximize profits. Adidas outsources manufacturing and handles marketing nationwide. Adidas collaborates with famous designers to stay ahead of the fashion curve. Furthermore, Adidas has many official relationships such as being an official sponsor of FIFA. By associating its brand with major sporting events such as the World Cup and the support of famous athletes, Adidas positions itself as a high-quality sports product. The market strength of Adidas can be measured using the Lerner index.LI=(P- M_C)/PCThere are some variables that are impossible to measure using the Lerner index. Adidas offers various goods and services at different prices with each type of product produced at a different marginal cost. Therefore, we found the average price of all Adidas products using the range, finding an average price using the highest and lowest prices. The marginal cost of production is also yet to be found. Using revenue and profit we can find the marginal cost. Quantity=Revenue/PriceCost=Revenue-ProfitCostMarginal˜Cost/QuantityThe revenue of the Adidas Group amounts to 3.533 billion euros. The price value we found was almost €187. The quantity of units sold by Adidas during the first quarter of 2014 can be estimated at approximately 18,893,000 units. Adidas' first quarter profit amounted to 1,736 million euros. Therefore, we can find that the total cost is almost 3,514,000,000 euros. By dividing this value by the estimated quantity, we can predict that the marginal cost will be around €186. Finally we can conclude that the Lerner index for Adidas Group is approximately 0.005. Although this seems very low, it is perfectly normal for Adidas to participate in a competitive market, making extremely high market power impossible. With an estimate of Adidas' market power in the world economy, we can then analyze the advertising intensity of the Adidas Group. A/S=e_A/e=e_A The advertising intensity of a specific company is measured using the Dorfman-Steiner theorem. Adidas reported 444 million euros for its sales and marketing operations budget. Overall sales, revenues, are equal to the previously indicated amount of 3.533 billion euros. Using this ratio, we can give advertising intensity a numerical value. This value is expressed as the number 7.9. It should be kept in mind that the Dorfman-Steiner theorem establishes the optimal amount of advertising for a company. By linking price and sales values, we hypothesized that the Adidas Group invests the optimal amount of resources in its advertising sector. The Vidale-Wolfe model also takes into consideration the quantity of advertising done, expressed by the variable µ. The variable µ equals 1/T_A or the inverse of the time an ad is observed. Based on the postulate that all viewers of the advertisement will watch the advertisement from start to finish and that Adidas will run an advertisement of medium length (about 30 seconds). Consequently, we can define the variable µ as 1/30 or approximately 0.033.(s(t)) ?=0.033?(1-(s(t))/M)-ks(t) (s(0) =s_0 )dS/dT=0.033?(1×-(s(t))/M)-ks(t)We can approximate the derivative of the sales function. Using Adidas' last two sales records over time, we can approximate the derivative of the sales function. The first quarter of 2014 recorded net sales for Adidas of 3,533 million euros. The last quarter of 2013 recorded net sales for Adidas of 3,479 million euros. Using the time of one quarter (3 months), we can use the difference to find the slope between these two points and consequently find the approximate derivative of the sales function.(3,533,000,000-3,479,000,000)/7889231.5=54,000,000 /7889231.5˜6.8=( s(t) ) ?The next postulate we can formulate is.