Brand awareness and advertising strategy

Final results for Brand Awareness

In BizCafe, you've started a new business, and people in Collegetown need to find out about it. So you've got to advertise.


The importance of brand awareness

The important metric to monitor in this regard is Brand Awareness, which you can find in the results page outside the simulation (and nowhere inside the simulation). This is basically the percentage of people in the market who are aware of your shop. According to winningatbizcafe.blogspot.com, it maxes out at 99.2 or so. They said that brand awareness doesn't deteriorate, but if you look at weeks 7 and 8 in the image above, you'll see that it can, though not by much.

Essentially, the more people who are aware of your product, the more people will buy your product. Pretty simple. It's better to get it up fast, because if you get it higher sooner, you'll sell more sooner, and it accumulates, which means you'll also sell more later. The greater the portion of the game you spend with a high brand awareness, the more you'll sell.


Advertising spend strategy

However, given that you can spend up to $4,200 a week on advertising, it's important to be strategic about it. That's a big chunk of change. Spending too much can seriously eat into your cumulative net income.

I created a worksheet in my Excel workbook to track changes in brand awareness and plan my ad spend (this is the final version; I adjusted the spend strategy as the game progressed):

One neat thing that I noticed was that the week-to-week gains seemed fairly consistent. By looking at the weekly changes, you could get a rough idea of what each team was spending.

At the start, we spent $2,800, and presumably, so did Derosa Coffee House and Cafe Loco, who also had increases in brand awareness of 7.2 points. I'm guessing Java Latte spent the maximum $4,200, which yielded an increase of 10.9. Entering week 2, it looks like Java Latte, Good Brews, and Derosa each spent the maximum $4,200, while Cafe Loco spent less. I was pretty much only concerned with Derosa, our strongest competitor. They kept up their spend going into week 3, and so did we.

For the starting decisions, it seems like the wise thing to do is to not spend the maximum amount on advertising. We spent $2,800, on online ads and 5 radio spots/day. You're going to lose money during that first week, but you don't want to lose too much. The teams that overspent at the start never caught up. We stepped it up for week 2 because we could afford it; despite spending $4,200 that week, we turned a profit of $880.

We bought maximum advertising through week 4

A game of reverse chicken

It occurred to me fairly early on that advertising spending was going to play out like the reverse of a game of chicken. Someone was going to flinch first, cut back on advertising, and save a ton of money, while the other teams would keep spending, and lose ground in cumulative net income. You want to hang in there, and stay competitive in brand awareness, but not for any longer than the other teams. This is an area of the game where what your competition does makes a big difference.

If it was a longer game than eight weeks, it would probably be more worth it to drive your brand awareness up to 99, but there would come a point at which the costs of continuing to spend on advertising would outweigh the benefits to be gained from it. If you're not getting a substantial increase in cup sales and revenue, what's the point?


The flinch

It came week 4. After we came in first in net income during weeks 2 and 3, Derosa Coffee House out-earned us by $49 during week 4.

Week 4 results

We earned more revenue than they did, so they must have spent less than we did. They had 35 employees to our 24, so it wasn't that. I looked at the changes in brand awareness. Ours went up by 19.1 points, while theirs went up by 15.2. I realized that they must have spent $2,800 to our $4,200.

As far as I was concerned, the endgame had begun. We were entering week 5, and rent was coming out. We needed to cut back. We discontinued the display ads, and cut back to 5 radio spots per day.

As a result, we pulled way ahead during week 5, earning $2,941 more than Derosa. Despite the added rent expense, we managed a higher net income than during week 4; all the other teams saw their net incomes drop.

During week 6, Derosa came back and out-earned us again, by $279. We spent $560 on 2 radio spots per day, while they cut back to nothing. If we hadn't bought those radio spots, we would have been on top that week. So that was the end of ad spending for the rest of the way.

Around the halfway point, sales volumes levelled off

Sales volumes level off

I mentioned earlier how it's important to keep an eye on industry-wide growth in cup sales, in addition to watching what your competition is doing. When you see that your ad spend is no longer leading to big gains in sales volume and revenue, it's time to cut back. Continuing to spend big cuts into your profits.


Coupons

I didn't bother with coupons, after reading the warning at winningatbizcafe.blogspot.com. Maybe in a longer game, after your brand awareness is maxed out, it might be worth it, but you're basically paying customers to buy your product. Save your money.


Word of mouth and possibly customer satisfaction

It would seem that there's some kind of word of mouth factor involved, because our brand awareness still climbed slightly, by about 2 points per week, after we ceased advertising. I have no proof of this, but I wouldn't be surprised if having a good customer satisfaction rating helps out word of mouth. That would explain why each team started out with identical increases in brand awareness at the start, but then had uneven increases subsequently. Again, just a guess on my part.