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Background Info In paid search, for a given search word, the ads for multiple companies may be displayed Ads shown in higher positions on the page result in a greater number of clicks Companies pay a certain $ amount each time a customer clicks on their ad A higher $ per click amount paid by a company gives the company a higher position on the page "Impressions" are driven by the number of searches users make -- it is the number of times that an online advertisement is displayed The number of impressions is driven by the number of searches made by people --and thus is the same regardless of what position we are in A "Click" is an instance of someone clicking on an advertisement Only a fraction of impressions results in clicks An "Install" is when a user downloads the app Only a fraction of clicks results in installs Scenario You are currently in position 2 of a paid search term, the click-through rate (customer clicks per impression) is 1% and the cost per click is $1.50 You can get into position 1 by paying $2.50 per click. In position 1, you expect a click-though rate of 1.5% In position 3 you would pay $0.50 cost per click, and have a click-though rate of 0.5% Conversion rate (registrations per click) once someone clicks is 10% in all 3 positions Our total Revenue per install (before search costs) is $30 Our goal is to maximize the Total $ profit Questions 1) What is the cost per install in position 2? 2) What is the cost per install in position 1? 3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2

Background Info In paid search, for a given search word, the ads for multiple companies may be displayed Ads shown in higher positions on the page result in a greater number of clicks Companies pay a certain $ amount each time a customer clicks on their ad A higher $ per click amount paid by a company gives the company a higher position on the page "Impressions" are driven by the number of searches users make -- it is the number of times that an online advertisement is displayed The number of impressions is driven by the number of searches made by people --and thus is the same regardless of what position we are in A "Click" is an instance of someone clicking on an advertisement Only a fraction of impressions results in clicks An "Install" is when a user downloads the app Only a fraction of clicks results in installs Scenario You are currently in position 2 of a paid search term, the click-through rate (customer clicks per impression) is 1% and the cost per click is $1.50 You can get into position 1 by paying $2.50 per click. In position 1, you expect a click-though rate of 1.5% In position 3 you would pay $0.50 cost per click, and have a click-though rate of 0.5% Conversion rate (registrations per click) once someone clicks is 10% in all 3 positions Our total Revenue per install (before search costs) is $30 Our goal is to maximize the Total $ profit Questions 1) What is the cost per install in position 2? 2) What is the cost per install in position 1? 3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2

Principles Of Marketing
Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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Background Info In paid search, for a given search word, the ads for multiple companies may be displayed Ads shown in higher positions on the page result in a greater number of clicks Companies pay a certain $ amount each time a customer clicks on their ad A higher $ per click amount paid by a company gives the company a higher position on the page "Impressions" are driven by the number of searches users make -- it is the number of times that an online advertisement is displayed The number of impressions is driven by the number of searches made by people --and thus is the same regardless of what position we are in A "Click" is an instance of someone clicking on an advertisement Only a fraction of impressions results in clicks An "Install" is when a user downloads the app Only a fraction of clicks results in installs Scenario You are currently in position 2 of a paid search term, the click-through rate (customer clicks per impression) is 1% and the cost per click is $1.50 You can get into position 1 by paying $2.50 per click. In position 1, you expect a click-though rate of 1.5% In position 3 you would pay $0.50 cost per click, and have a click-though rate of 0.5% Conversion rate (registrations per click) once someone clicks is 10% in all 3 positions Our total Revenue per install (before search costs) is $30 Our goal is to maximize the Total $ profit Questions 1) What is the cost per install in position 2? 2) What is the cost per install in position 1? 3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2
Transcribed Image Text:Background Info In paid search, for a given search word, the ads for multiple companies may be displayed Ads shown in higher positions on the page result in a greater number of clicks Companies pay a certain $ amount each time a customer clicks on their ad A higher $ per click amount paid by a company gives the company a higher position on the page "Impressions" are driven by the number of searches users make -- it is the number of times that an online advertisement is displayed The number of impressions is driven by the number of searches made by people --and thus is the same regardless of what position we are in A "Click" is an instance of someone clicking on an advertisement Only a fraction of impressions results in clicks An "Install" is when a user downloads the app Only a fraction of clicks results in installs Scenario You are currently in position 2 of a paid search term, the click-through rate (customer clicks per impression) is 1% and the cost per click is $1.50 You can get into position 1 by paying $2.50 per click. In position 1, you expect a click-though rate of 1.5% In position 3 you would pay $0.50 cost per click, and have a click-though rate of 0.5% Conversion rate (registrations per click) once someone clicks is 10% in all 3 positions Our total Revenue per install (before search costs) is $30 Our goal is to maximize the Total $ profit Questions 1) What is the cost per install in position 2? 2) What is the cost per install in position 1? 3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2
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Hi, could you please help me with questions 4 and 5?

3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2
Transcribed Image Text:3) Asumming the ad has at least 100,000 impressions, which of the 3 positions do you want to be in to maximize total profit? 4) At what click through rate in position 1 are you indifferent between positions 1 and 2? 5) What is the cost per installs of the additional installs you gain by moving from position 3 to position 2
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