Promotion Expenditure, Categories, Time Lag Structure, and the Demand for Almonds
NAVAL POSTGRADUATE SCHOOL MONTEREY CA GRADUATE SCHOOL OF BUSINESS AND PUBLIC POLICY
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The Almond Board of California ABC administers a grower-initiated federal marketing order under the supervision of the United States Department of Agriculture USDA to promote consumption and to increase the market share of California-produced almonds in domestic and international markets. In accomplishing this mission, it finances four different categories of promotional programs advertising, public relations, food services, and nutrition research. Most of the funding allocation decisions are made under uncertainty in supply, demand, and the relationship between promotional programs and demand. This research examines the latter relationship, with the intent of exploring the relative effectiveness of various promotional program categories. The model developed here relates ABCs four expenditure categories to the demand for almonds, as measured by monthly almond shipments. Acknowledging that the impact on shipments lags promotional expenditures, the model used a heuristic but conservative search procedure to uncover a parsimonious lag structure from a limited set proposed by ABC. The model controls for other factors that might affect almond shipments, including seasonality, almond prices, and personal income. In addition to assessing the overall return on investment that the ABC provides its members a backward-looking measure of historical effectiveness, this research provides some limited diagnostic information to help guide future managerial decisions among the available opportunities. Results show that ABC expenditures have a significant effect on domestic almond shipments, explaining 16.7 of the variation in shipments. However, only advertising is strongly significant each dollar spent increases almonds shipped 8 months later by 8.25 pounds. Food services approached significance each dollar spent increases almonds shipped 11 months later by 32.8 pounds.
- Administration and Management
- Economics and Cost Analysis
- Food, Food Service and Nutrition