• TABLE OF CONTENTS
HIDE
 Copyright
 Title Page
 Acknowledgement
 Table of Contents
 List of Tables
 Introduction
 List of Figures
 Analytical model
 Empirical model
 Empirical results
 Summary and industry implicati...
 Appendices
 Reference






Group Title: Agricultural Economics report 20
Title: Optimal allocation of the Florida citrus industry's generic advertising budget
CITATION PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027475/00001
 Material Information
Title: Optimal allocation of the Florida citrus industry's generic advertising budget
Physical Description: v, 55, 1 leaves. : ;
Language: English
Creator: McClelland, Edward L
Polopolus, Leo
Myers, L. H ( Lester H. ), 1939-
Publisher: Florida Agricultural Experiment Station, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Publication Date: 1971
 Subjects
Subject: Citrus -- Marketing   ( lcsh )
Citrus fruit industry   ( lcsh )
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: leaf 56
Funding: Florida Historical Agriculture and Rural Life
Bibliography: Agricultural economics report - University of Florida Dept. of Agricultural Economics ; no. 20
Statement of Responsibility: Edward L. McClelland, Leo Polopolus, Lester H. Myers.
 Record Information
Bibliographic ID: UF00027475
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 001615841
oclc - 03114224
notis - AHP0284

Table of Contents
    Copyright
        Copyright
    Title Page
        Title
    Acknowledgement
        Page i
    Table of Contents
        Page ii
    List of Tables
        Page iii
        Page iv
    Introduction
        Page 1
        Page 2
        Page 3
    List of Figures
        Page v
    Analytical model
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
    Empirical model
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
    Empirical results
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
    Summary and industry implications
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
    Appendices
        Page 52
        Page 53
        Page 54
        Page 55
    Reference
        Page 56
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida





/0 April 1971 Ag. Econ. Report






Optimal Allocation of the Florida Citrus

Industry's Generic Advertising Budget


HU Lirr"Y I

F .S- U.5"E 72 --.; -
fF A


Department of Agricultural Economics
Florida Agricultural Experiment Stations
Institute of Food and Agricultural Sciences
University of Florida, Gainesville
In Cooperation With The
Economic Research Department
Florida Department of Citrus


Edward L. McClelland
Leo Polopolus
Lester H. Myers


~BIWIBRB~L~.~ID~mrr~~~i~~F~,~_~cFnrrr~








ACKNOWLEDGMENTS

The authors wish to acknowledge the valuable suggestions offered

by departmental reviewers, F. J. Prochaska, J. R. Conner and C. D. Covey.

Without the full support of the Florida Department of Citrus, the study

would not have been possible. Special recognition is due the following

Department of Citrus staff members: Edward Taylor, Executive Director;

Vernon Mullen, Director, Advertising Department; and W. B. Lester,

Director, Economic Research Department.

This report is based upon a Ph.D. Dissertation by Edward McClelland,

"Optimal Allocation of the Florida Citrus Industry's Generic Advertising

Budget," Department of Agricultural Economics, University of Florida,

Gainesville, 1969.

The computer work was done at the University of Florida Computing

Center.








TABLE OF CONTENTS

Page
ACKNOWLEDGMENTS . . . . . ... i

LIST OF TABLES . . . . ... ...... iii

LIST OF FIGURES . . . . ... ...... v

INTRODUCTION . . . . ... . . 1

Background . . . . ... . 1
Objectives . . . . ... . 3

ANALYTICAL MODEL . . . . ... . 4

Advertising Response Curve . . . . 6
Advertising Costs . . . . ... .. 8

EMPIRICAL MODEL . . . . ... . 11

Consumer Expenditure Equations . . . ... 12

Processed Products . . . ... 12
Fresh Products . . . .... 15
Data . . . . ... . 15

Advertising Expenditure Allocation . . ... 17

EMPIRICAL RESULTS . . . . ... . 21

Alternative Advertising Budget Allocations for
Processed Products . . . . ... 22
Alternative Advertising Budget Allocations for
Fresh Fruit . . . . .... . 28
Estimated Total Net Revenues Derived from Alternative
Budget Allocations . .. . . . 32
Composite Advertising Budget Allocations . ... 35
A Comparison of Historical and Theoretical Advertising
Budget Allocations . . . . ... 37
Limitations of the Allocation Model . . ... 40
Future Research Recommendations . . ... 44

SUMMARY AND INDUSTRY IMPLICATIONS . . . ... 46

Processed Product Advertising . . . ... 46
Fresh Product Advertising . . . ... 50

APPENDICES . . . . ... . . 52

REFERENCES . . . ... . . . 56







LIST OF TABLES

Table Page

1 Total Florida orange and grapefruit production and
total Florida Citrus Commission advertising
expenditures for all citrus products, crop years
1960-61 through 1966-67 2

2 Processed Products: Monthly allocation of the Florida
Department of Citrus' annual advertising budget
by product-region for various sized budgets 23

3 Processed Products: Percentage of the Florida Depart-
ment of Citrus' annual advertising budget alloca-
ted by geographic regions for various sized
budgets 27

4 Processed Products: Percentage of the Florida Depart-
ment of Citrus' annual advertising budget alloca-
ted by product form for various sized budgets 28

5 Fresh Products: Monthly allocation of the Florida
Department of Citrus' annual advertising budget
by product-region for various sized budgets 30

6 Fresh Products: Percentage of the Florida Department
of Citrus' seasonal advertising budget allocated
by geographic regions for various sized budgets 31

7 Fresh Products: Percentage of the Florida Department
of Citrus' seasonal advertising budget allocated
by product form for various sized budgets 31

8 Processed Products: Monthly total net consumer sales
by product-regions due to optimum generic adver-
tising for various sized budgets 33

9 Fresh Fruit: Monthly total net consumer sales by
product-regions due to optimal generic adver-
tising for various sized budgets 34

10 Monthly allocation of the Florida Department of
Citrus' annual advertising budget by product-
region for various sized budgets combining
processed and fresh products 36

11 Processed Products: Actual and optimum monthly adver-
tising allocations of the Florida Department of
Citrus' annual advertising budget by product-
region for selected budgets 38

12 Fresh Products: Actual and optimum monthly advertising
allocations of the Florida Department of Citrus'
annual advertising budget by product-region for
selected budgets 39







LIST OF TABLES--Continued


Table Page

13 Processed Products: Total net consumer sales for the
actual and optimum monthly allocation of the
Florida Department of Citrus' advertising budget
by product-region for selected budgets 41

14 Fresh Products: Total net consumer sales for the
actual and optimum monthly allocations of the
Florida Department of Citrus' advertising budget
by product-region for selected budgets 42

15 Actual and optimum proportions of the advertising
budget allocated by regions for processed
products at selected budget levels 47

16 Actual and optimum proportions of the advertising
budget allocated by product for processed
products at selected budget levels 49

17 Actual and optimum proportions of the advertising
budget allocated by regions for fresh products
at selected budget levels 50

18 Actual and optimum proportions of the advertising
budget allocated by product for fresh products
at selected budget levels 51














OPTIMAL ALLOCATION OF THE FLORIDA CITRUS INDUSTRY'S
GENERIC ADVERTISING BUDGET

Edward L. McClelland, Leo Polopolus and Lester H. Myers


INTRODUCTION


Background

In 1935 the Florida Citrus Commission1 was established by an act

of the Florida state legislature. This enactment was in response to

the recommendations of the leading Florida citrus growers and shippers

who saw the need for the regulation of product standards and the ini-

tiation of an industry program to promote Florida's citrus fruit. Such

legislation was deemed essential to combat the promotional efforts of

the California citrus industry, which had been organized in 1907, and

to insure a national market for the increased production of Florida

citrus products.

Since 1935, the advertising and promotion of Florida citrus pro-

ducts has been carried out through a self-help tax program which is

financed by a fixed fee assessed on every box of citrus fruit harvested




Edward L. McClelland was previously a graduate research assistant
in Agricultural Economics at the University of Florida and is presently
Economist, Federal Reserve Bank of Dallas; Leo Polopolus is Professor
of Agricultural Economics and Assistant Dean of the Graduate School,
University of Florida; and Lester H. Myers is Research Economist, Florida
Department of Citrus and Assistant Agricultural Economist, Florida Agri-
cultural Experiment Stations.

The Florida Citrus Commission became the Florida Department of
Citrus (DOC) under state reorganization in 1969.








for commercial markets. All taxes levied, as directed by the Florida

Citrus Code, [5, Chapter 601.15] are due and payable by the processor

or fresh fruit packer when the citrus fruit is first handled in the

primary channels of trade. Tax rates are fixed for a given crop year

but may be changed through legislative action between succeeding years.

When special advertising campaigns are authorized, additional taxes can

be levied under the special state "Campaigns" Act, [5, Chapter 601.152].

Since the tax is assessed on essentially all of the boxes of fruit

produced, the revenues made available each year vary directly with the

size of the crop harvested. Historically, the production of Florida

oranges and grapefruit increased from 27.4 million boxes in the 1935-36

season to 188.1 million boxes in the 1966-67 season. During the same

period the industry's advertising budgets increased from $364,000 to

nearly $9.0 million annually. Total annual production of citrus fruit and

advertising budgets for the period of this study are shown in Table 1.


Table l.--Total Florida orange and grapefruit production and total
Florida Citrus Commission advertising expenditures for all
citrus products, crop years 1960-61 through 1966-67



Crop Orange Grapefruit Advertising
Year Production Production Expenditures
------- million boxes -------- million dollars

1960-61 86.7 31.6 3.06
1961-62 113.4 35.0 3.52
1962-63 74.5 30.0 3.09
1963-64 58.3 26.3 4.01
1964-65 86.2 31.9 2.96
1965-66 100.4 34.9 2.57
1966-67 144.5 43.6 8.79



alone box equals 1-3/5 bushels.

Source: Orange and Grapefruit Production [6].
Advertising Expenditures [4].








Commitments of funds to advertising programs are made by the

Florida Department of Citrus, but actual advertising campaigns are

managed jointly by the Department and a contracted advertising agency.

It is the advertising agency's responsibility to design and to imple-

ment the advertising program. Designing a campaign includes defining

sales markets, selecting advertising media and creating the advertise-

ment copy. Final selections among advertising proposals have been

based on various indicators associated with sales response--product

awareness, ad recall, slogan recall and other similar factors.


Objectives

As with similar organizations faced with limited financial resources,

the Florida Department of Citrus is interested in spending its available

advertising budget such that consumer sales revenue net of advertising

costs is maximized. The scope of this study is to develop an economic

model to provide information as to how the advertising budget can best

be allocated among citrus products and regional markets. Information

gained in this study will directly aid those decision makers who are

responsible for managing the Florida Department of Citrus' advertising

budget. Other marketing managers and economists who have an interest

in the empirical allocation of fixed resources among various product,

regional or temporal alternatives may also benefit from model to be

developed.

The model deals with the allocation of the Florida citrus industry's

advertising budget and does not deal with individual firms within the

industry. Therefore, production and marketing costs incurred by indivi-

dual packers and processors are assumed to be fixed over advertising

levels. It is also assumed that these firms are competing in purely


competitive markets.








LIST OF FIGURES

Figure Page

1 Geographic Marketing Regions of the United States 5

2 Consumer Sales Response to Commodity Advertising
Expenditures in One Product-Region 7

3 Net Returns from Advertising Product i in Region j 9

4 Marginal Net Revenue Product for Processed Product
Advertising Budgets 24

5 Marginal Net Revenue Product for Fresh Product
Advertising Budgets 29








Product alternatives considered are canned single strength orange

juice, canned single strength grapefruit juice, frozen concentrated

orange juice, chilled orange juice, fresh oranges and fresh grapefruit.

The geographic regions selected for this study conform to the census

regions defined by the United States Census Bureau. The New England,

Pacific, Mountain, West North Central, West South Central, East North

Central, East South Central, Middle Atlantic and South Atlantic census

regions are presented in Figure 1. Although these remain highly aggre-

gative areas in which consumer buying characteristics can vary widely,

the data should serve to indicate general spatial variations in consumer

response to various levels of advertising.


ANALYTICAL MODEL

A study of the optimum advertising expenditure allocation of Depart-

ment of Citrus advertising funds involves several unique aspects. These

include:

(1) The advertisement of an agricultural commodity produced by

many producers with no effective method of supply control;

(2) The use of time series data to measure consumer purchase

response to various levels of advertising expenditures;

(3) The allocation of a given advertising budget among various

products and regional alternatives.

Nerlove and Waugh [9] studied the problem of advertising a commo-

dity without effective supply control, and Zentler and Ryde [12] dealt

with the geographic distribution of promotional expenditures. However,

no model has been empirically applied to a problem encompassing all of

the characteristics outlined above.



























- .-.- -


I -~--'
I
, ...-.NA.
,MOUNTAIN "
s.


-
9 --,
* I


WEST
SOUTH
CENTRAL


Geographic Marketing Regions of the United States


Figure 1.









Advertising Response Curve

While one may agree with Zentler and Ryde that the theoretical

advertising response curve is sigmoidal, from a theoretical point of

view one can argue that the curve should eventually turn downward

rather than become asymptotic to some level of expenditures, i.e., beyond

2
some point the marginal sales response to advertising may be negative.

This analysis assumes advertising response curves of the nature depicted

in Figure 2. The term q.. is defined as the quantity of the ith product
1z-
sold in the jth region. The advertising response curve (BC) intersects

the vertical axis at some point, say B. The intercept value at point B

is interpreted as the level of monthly dollar sales of qi assuming

that no advertising for q.. occurred. In the absence of competitive

advertising, point B corresponds to the concept of a "natural level of

consumption" as defined by Zentler and Ryde [12].

Competitive advertising among processed and fresh citrus products

does exist, however, and serves to position the advertising response

curve for a given product and region. It may be assumed, for example,

that advertising expenditures for other processed citrus products with-

in a given region tend to affect the advertising response curve for a

given product in that region. If increased advertising expenditures for

another product, k, shift the response curve for product i upward and to

the left (say from BC to B"C"), then the promotion of k is said to be

complementary to the sales of product i. This is the so-called "umbrella

effect" whereby the promotion of one product calls the consumer's




2Empirical observations are expected to lie in the range to the
left of the maximum point on the sales response curve, i.e., where the
marginal sales response to advertising is positive.

































. 9 *


Consumer Sales
of Product i
in Region j
(dollars)
B"





B



B'








0


- N


C"


\ \C


Advertising Expenditures on Product i in Region j (dollars)


Figure 2. Consumer Sales Response to Commodity Advertising
Expenditures in One Product-Region


c----~z
L









attention to another similar product, thus stimulating sales for the

similar product. If increased advertising expenditures for product k

shift the response curve for product i downward and to the right (say

from BC to B'C'), the promotion of k is said to be competitive to the

sales of product i.

While the level of advertising of citrus products within a given

region is assumed to affect the position of other citrus products'

advertising response curves within the same region, it is assumed to

have no effect on advertising response curves in other geographic

regions. That is, the model assumes independence of advertising res-

ponse between geographic regions.

Many other factors tend to affect the positioning of a given adver-

tising response curve over time. Two very important ones are population

and disposable personal income levels. These variables have both been

increasing at a relatively steady rate over time. Thus, the empirical

model incorporates a "time" variable to account for their influences as

well as that of other unmeasured variables whose values change uniformly

.over time.


Advertising Costs

The Florida Department of Citrus considers marketing costs to be

those expenditures incurred for advertising and promotion. Since the

primary function of the Department of Citrus is to promote Florida

citrus products, the bulk of their annual budget goes for that purpose.

Suppose we modify Figure 2 somewhat to include advertising costs.

Figure 3 illustrates the situation when generic advertising costs are

considered as the only independent variable, and all other firm produc-

tion and marketing costs are assumed fixed. Segment OD of the vertical






















Consumer
Sales and
Advertising
Costs,
Product i
in Region j.
(dollars)


0 A


Advertising Expenditures on Product i in
Region j (dollars).


Figure 3. Net Returns from Advertising Product i in
Region j.








axis represents fixed production and marketing costs, i.e., all costs

other than generic advertising costs. The vertical distance between the

BC curve and the DE curve measures the amount that total dollar sales

exceed total costs. This distance is the greatest where the slope of BC

is equal to the slope of DE. Thus, an advertising expenditure of Ao

would maximize net consumer expenditures from advertising product i in

region j.

It is assumed that the objective of the Department of Citrus is to

allocate their advertising budget in such a manner that 9 6
Z iBC..-DE..
j=l i=l '0 '0

is maximized. That is, the Department of Citrus strives to maximize

consumer expenditures net of advertising costs over all six products

and nine regions. In the absence of any budget constraints, the solu-

tion is to simply allocate an amount to each product-region that equates

marginal expenditures to the marginal advertising costs.3 The total opti-

mum expenditure then is the summation of all product-region expenditures.

The Florida Department of Citrus operates with a very real adver-

tising budget constraint. Funds are generated via a fixed excise tax

on every box of fruit produced in the state. Thus, the advertising

budget available is directly related to the amount of citrus produced

during the year. Given a budget, an optimum allocation is one which

equates the difference between marginal consumer expenditures and mar-

ginal costs of advertising in all product-regions subject to the con-

straint that the available budget is not exceeded. Three possible




Product-region is defined as the market for the ith product in
the jth region. Therefore, there are a total of 54 product-regions
included in this analysis.






11
situations may occur. First, if the available budget is less than the

optimum budget, the net marginal consumer expenditures in all product-

regions entering the solution will be positive. In this case the indus-

try would benefit from a larger advertising budget. Second, if the

available budget is greater than the optimum budget, the net marginal

expenditures in all product-regions entering the solution will be nega-

tive. This would indicate the industry was spending too much for generic

advertising and would benefit by decreasing their budget. Finally, the

available budget could coincide with the optimum budget in which case

the net marginal expenditures would be zero in all product-regions.


EMPIRICAL MODEL

The Florida Department of Citrus' advertising and promotional pro-

grams are planned to expand the demand for all varieties of citrus

fruit, except lemons and limes, produced within the state at the national

retail and wholesale levels of trade. Limited data availability resric-

ted this study to the six Florida products mentioned previously. Primary

products omitted were tangerines in fresh and juice forms, chilled grape-

fruit sections, grapefruit salads and specialty fruits. A small portion

of the national advertising program in the form of trade luncheons, con-

vention advertising, promotional give-away items and trade publication

advertising is directed toward the wholesale and distributive trade

sector. Nevertheless, the bulk of a particular advertising budget is

spent on national media at retail market level.

Advertising and promotional strategies of the Florida Department of

Citrus are implemented for convenience on a crop year basis. Specific '

advertising campaigns are often conducted throughout the year for pro-

cessed products, but advertising of fresh oranges and grapefruit is






12

limited to the respective harvest seasons. For this reason, separate

allocation models are defined for processed and fresh products.


Consumer Expenditure Equations


Processed Products

Total consumer expenditure functions for canned single strength

grapefruit juice, canned single strength orange juice, frozen concen-

trated orange juice and chilled orange juice are presented below. It

is assumed that total consumer expenditures for product i in region j

are a quadratic function of the advertising expenditures on product i

in region j. Intraregional cross product effects of advertising are

accounted for by including a variable for the advertising expenditures
4
of each of the other citrus products sold within the region. Time is

included as a variable to represent the effects of changes in popula-

tion, income and unidentified forces on product sales.

A generalized total expenditure equation for processed products is

expressed as follows:
4 2
(1) Eijk = aj + Zb i A(k-c) cAi(k-a) + d Tk + 'ik


where:

E = total consumer expenditures for the ith product in the jth

region during month k, in dollars

Aij(k-a) = total advertising expenditures for the ith product in the

jth region during month (k-a), 0 < a < 6, in dollars




4The phrase "cross product effects of advertising" refers to the
impact of substitute and complimentary product advertising upon the
consumer expenditure of a given product.







k = 7, ..., 84 is the number of the monthly observation beginning

January 1961 = 7 and ending June 1967 = 84. a is the number

of months which unit advertising expenditures were lagged.

For example, Alj(k-6) indicates that advertising expenditures

for the lth product in the jth region are lagged six months.

When k = 7 and a = 6 the initial advertising expenditures start

in July 1960. Note: Since i and Z both refer to products,

A. and A are used interchangeably.
S(k-a) Zlj (k-a)

Tk = a time variable measured by numbering the monthly observations

consecutively.

a.., b., and d.. are the unknown parameters.
zj ibil' id ij

pijk is a random error term with

E [ik] = 0

E [ijk' ijm] = aij for k = m

0 for k # m

i, 1 = 1, ..., 4 is the number of processed citrus products

defined as follows:

1 = canned single strength grapefruit juice

2 = canned single strength orange juice

3 = frozen concentrated orange juice

4 = chilled orange juice

j = 1, ..., 9 is the number of geographic regions defined as

follows:

1 = New England

2 = Pacific








3 = Mountain

4 = West North Central

5 = West South Central

6 = East North Central

7 = East South Central

8 = Middle Atlantic

9 South Atlantic

Measuring the time lag between the application of advertising and/or

promotional effort and consumer response in the form of increased sales

is an empirical question. The presumption made is that the time period

required for consumers to react to advertising may vary widely from

product-region to product-region, and a number of lagged advertising

variables are required to measure consumer response for a given product

in a given region. For this reason, the equations are specified with an

indeterminate advertising lag period of from zero to six months. Empi-

rical results were used to determine the length of lag to include in

the allocation model.

Two criteria were used to select the best product-region equation

from among the several estimated equations to be used in the allocation

model. The signs of the own product advertising expenditure variables

for each product-region were of prime concern. To meet the necessary

conditions for an optimum allocation, the linear own product advertising

coefficient had to be positive, and the quadratic own product advertising

coefficient had to be negative. If the estimated coefficients met the

necessary sign conditions in each equation for a given product-region,

the final choice of the equation to be used in the allocation model was

determined by the equation which had the highest coefficient of determi-

nation.








Fresh Products

Total consumer expenditure equations for fresh Florida oranges and

grapefruit are presented below. Since the data for fresh fruit were

only reported on a seven month annual basis, lagged advertising expen-

diture variables were not used in the estimation procedure. Total

expenditure equations as a function of current advertising expenditures

for the ith fresh product in the jth region are expressed as follows:
6 2
(2) Eijk = a + E b Ak ci..A + diT + ijk
Z=5

where all variables are as previously defined and:

i, 1 = 5, 6 is the number of fresh products defined as follows:

5 = fresh Florida oranges

6 = fresh Florida grapefruit

k = 1, ..., 49 is the number of the monthly observations

(November through May each crop year) beginning November

1960 and ending May 1967.


Data

The data used in this study are generic or commodity advertising

expenditures, sales records for each product-region, a price series

index of food purchases for home consumption and regional population

figures. These data series were available on a monthly basis for the

period July 1960 through June 1967.

The advertising expenditures were obtained from Department of Citrus

accounting invoices, which were dated and recorded by product form and

type of advertising medium utilized. These data were then aggregated

by months and divided by the regional circulation of media purchased.

Since some media are not necessarily circulated exclusively within the








defined geographic boundaries, the resultant advertising expenditures

represent only estimates of the actual advertising efforts within each

region. It was assumed that consumer responses to advertising across

regional boundaries mutually cancel each other, so the estimated expen-

ditures in each area measure the true advertising efforts within any

given geographic region.

Total consumer expenditure data for each product in each region

were purchased from the Market Research Corporation of America. The

source of the data is a nationwide consumer panel of representative

household units located throughout the United States. From an itemized

sample of consumer panel purchases, regional estimates of total consumer

purchases are obtained by the use of regional multipliers. The reported

quantity of citrus products sold and total expenditures are, therefore,

estimates of the true regional sales figures.

Brand advertising expenditure data are omitted from this study. It

is recognized that brand advertising plays an important role in the pro-

motion of Florida's citrus products by a few individual firms. While

knowledge of the allocations of brand advertising expenditures by

product-regions would be useful information in the allocation of the

generic advertising budget, the necessary data were not available for

inclusion in this analysis.

All consumer and advertising expenditure variables were deflated

to a common base using the price index of food purchases for home con-

sumption, June 1967 = 100 [10]. The last month of the time series was

chosen to identify the base period, as opposed to any earlier period,

to more closely approximate current prices.

The data included in this study span two significant shifts in

citrus crop production. The first was the freeze in December 1962 and






17

the second was the 1966-67 recovery from the 1962 freeze in the form of

new plantings and restoration of old groves. It is felt that these two

shifts in production not only aid in identifying total revenue functions

for each product-region, but also permit a wide range of advertising

expenditure levels.

Sales and advertising data for imitation and synthetic citrus fla-

vored products are not used in this study because the necessary regional

data were not available. Some of the new synthetic drinks may be consid-

ered substitutes for Florida citrus beverages, but the lack of necessary

sales data prohibits measuring the degree of substitutability of these

competitive products on a regional basis.

Although the exclusion of brand advertising and price data of com-

peting synthetics may introduce bias in the results, the magnitude of

the bias is presumed to be negligible. Regional consumer purchasing

characteristics are widely known and generally accepted by the major

firms in the citrus industry. With this information available it is

reasonable to assume that the regional distribution of brand advertising

expenditures by individual firms is similar to the regional allocation

of Department of Citrus advertising expenditures. Therefore, the collec-

tive brand advertising efforts of firms within the Florida citrus

industry would tend to complement the generic advertising campaigns.

Advertising expenditures are controlled by the Department of Citrus.

As such, they are independent variables with respect to consumer expen-

ditures. Thus, single-equation least squares techniques are appropriate

for estimating the a.., b., c.i and d.. parameters of the model.


Advertising Expenditure Allocation

The primary objective of the study was to allocate the Department

of Citrus (DOC) advertising budget such that the summation of consumer








expenditures for Florida citrus products, net of advertising expenditures,

over all nine regions and six products is maximized. Because of the

separability of the fresh and processed consumer expenditure equations,

different models were developed for allocating advertising expenditures

among processed and fresh products. In general terms, the objective was

to maximize:

9 6
Z E (E.. A..)
j=l i=l
9 6
subject to:
E Z A.. j=l i=l

where:

E.. is total consumer expenditures for the ith product in the jth

region (See equations 1 and 2).

A.. is advertising expenditure by the DOC for the ith product in

the jth region.

B is the DOC advertising budget, prorated on a monthly basis.

i and j are as previously defined, see equations (1) and (2).

From equations (1) and (2) E.. is a quadratic function of A...

Thus, the general allocation problem conforms to the traditional quadra-

tic programming problem which may be summarized as follows:

(3) To maximize f(A) = b'A A'CA

(4) Subject to G'A < B and A > 0.

where:

f(A) is the consumer expenditure function, net of advertising

expenditures;

b is a (h X 1) vector of estimated coefficients for advertising

expenditure variables;








C is a (h X h) matrix of estimated coefficients for squared

advertising expenditure variables;

A is a (h X 1) vector of advertising expenditure activities;

G is a (h X 1) vector of advertising coefficients;

B is the budget size;

n is the number of product regions.

The specific allocation model may be exemplified via the use of a

two-product, two-region model conforming to the general expenditure

functions (1) and (2). Define NE.. = E.. A.. as consumer expenditures
z3 z13 13
for the ith product in the jth region net of advertising expenditures

for the ith product in the jth region. Then equations (5) through (8)

give the two-product, two-region, net expenditure equations.

(5) NE = a + bi A + b A c A + d T A
11 11 111 11 121 21 11 11 11 11

(6) NE = a + b A + b A c A2 + d T A
(6) NE21 =21 + b211 + b221A21 211 21 21

(7) NE = a + b A + b A c 2A + d1T A
12 12 112 12 122 22 12 12 12 12
2
(8) NE = a + b A + b A c A + d T A
(8) NE22 = 22 + b212 12 + b22222 c222 + d22T A22
2 2 2 2
The objective is to maximize E Z NE.. subject to Z E A.. < B.
j=1 i=l 1 j=1 ii =1 -

In the notation used in (3) and (4) we have:

(9) Maximize f(A) = D + b'A A'CA

Subject to

(10) G'A < B

A> 0




Since these equations are assumed to hold for all months, the k
subscript is dropped. Also, since these functions now represent esti-
mated equations, the random error term p.. is not included.
1-3







where:

a1 + d T-1 b211 0 0

a21 + d21T b121 b221-1 0 0
D = b =
a12 + dl2T 0 0 b 12-1 b212

a22 + d22T 0 0 b22 b222-1


All C11 0 0 0 1


A21 0 C21 0 0 1
A = C = G =
A12 0 0 C12 1

A22 0 0 0 C22 1

and B is the available advertising funds for the four product-regions.

The necessary conditions for a maximum require that the net marginal

consumer expenditures with respect to advertising expenditures be equal

in all product-regions. The D vector is not an influential factor in

the optimizing procedure since it drops out of the equations when par-

tial derivatives of (9) with respect to the A..'s are taken.
lz-J
The sufficient conditions for a global maximum require that the

matrix C be positive semi-definite. Since C is a diagonal matrix, the

sufficiency conditions require that C.. < 0 for all i and j.6

Three models were formulated for empirical application. These

models are as follows:

(11) Model I

Max: f(A) = b'A A'CA

Subject to: A > 0.




See [3, pp. 311-322] and [2, pp. 5-7].







(12) Model II

Max: f(A) = b'A A'CA

Subject to: G'A < B

A> 0

(13) Model III

Max: f(A) = b'A A'CA

Subject to: G'A = B

A> 0

Model I assumes no budget constraint. It simply requires that

advertising expenditures be nonnegative for all product-regions. Model

II requires that f(A) be maximized subject to the condition that the

total funds allocated cannot exceed budget B. Model III requires utili-

zation of the entire budget.


EMPIRICAL RESULTS

A variety of situations were analyzed using a simplex algorithm.

Optimal advertising allocations were determined for fresh and processed

products separately and for all citrus products combined. The actual

advertising allocations of the Florida Department of Citrus were compared

with theoretical allocations computed from the quadratic programming

analysis. For all situations different levels of constrained advertising

budgets were allocated. Also, estimates of the marginal responses net

of advertising expenditures were calculated as a measure of the proxi-

mity of the advertising budget to the optimum size.





7The two phrases "marginal responses net of advertising expenditures"
and "marginal net revenue products" are used interchangeably.








Alternative Advertising Budget Allocations
for Processed Products

Annual budgets of $1.0, $2.0, $3.0, $4.0 and $4.36 million were

allocated among the processed products. The optimal unconstrained bud-

get was found to be $4.36 million per twelve month season, i.e., the

marginal net revenue products were zero for each product-region at this

budget level. The resulting allocation schemes are presented in Table

2. Marginal net revenue products for the processed product-regions in

solution for the various budgets are $6.70, $4.00, $1.98, $0.50 and

$0.0, respectively, and are plotted in Figure 4. A marginal net revenue

product of $2.0, for example, suggests that an additional dollar of

advertising yields two additional dollars in total net consumer expen-

ditures, holding all other factors constant.

The optimum allocations of Table 2 include 26 of the 36 possible

product-region combinations for processed products. The exclusion of

ten product-regions was due to two factors: an inability to estimate

some total response functions with at least a .05 level of significance

and the failure of some empirical functions to meet the other necessary

and sufficient conditions for maximization.8

As the size of the budget is increased, the net marginal revenue

product values decrease for those activities in solution. Also, the

distribution and magnitude of the allocations change with increases in

the size of the budget. The rate of change of advertising expenditures

for any one product-region depends upon the degree of curvature of the




Five product-regions were deleted for each of the two factors.
Allocations that excluded only those empirical equations that failed to
meet the necessary and sufficient conditions of the programming model
are available in McClelland [7].














Table 2.--Processed Products: Monthly allocation of the Florida
Department of Citrus' annual advertising budget by
product-region for various sized budgets



Product-a Annual Advertising Budget
Region (million dollars)
1.0 2.0 3.0 4.0 4.36


------------ monthly


4,922
0
3,200
0
0
3,156
907
1,152
0
0
0
0
21,933
0
0
706
1,072
72
0
0
25,611
0
0
7,220
13,382
0


5,373
0
16,726
0
748
3,785
1,103
1,428
6
0
0
490
37,847
3,837
0
2,756
23,616
2,488
0
0
31,759
0
0
10,440
21,836
2,429


allocation in dollars -----------


5,710
0
26,812
0
2,894
4,254
1,249
1,634
190
0
9,480
1,649
49,712
11,595
0
4,284
40,425
4,288
0
0
36,344
0
3,726
12,841
28,140
4,774


5,956
0
34,210
0
4,468
4,598
1,357
1,785
324
0
21,810
2,499
58,416
17,286
0
5,405
52,756
5,610
1,063
0
39,707
0
22,222
14,603
32,764
6,495


6,039
0
36,700
0
4,998
4,714
1,393
1,938
369
0
25,960
2,786
61,345
19,969
0
5,782
56,905
6,504
1,953
0
40,839
0
28,446
15,196
34,320
7,074


A list containing definitions of
table may be found in Appendix A.


the abbreviations used in this


CSSGJ-NE
CSSOJ-NE
FCOJ-NE
COJ-NE
CSSGJ-P
COJ-P
CSSGJ-M
CSSOJ-M
COJ-M
CSSOJ-WNC
FCOJ-WNC
COJ-WNC
CSSOJ-WSC
FCOJ-WSC
COJ-WSC
CSSOJ-ENC
COJ-ENC
CSSGJ-ESC
FCOJ-ESC
COJ-ESC
CSSGJ-MA
FCOJ-MA
COJ-MA
CSSGJ-SA
CSSOJ-SA
COJ-SA










Marginal
Net Revenue
Product


0 1.0 2.0 3.0


4.0


Advertising Budget
(million dollars)


Figure 4.


Marginal Net Revenue Product for Processed Product
Advertising Budgets







25
total net expenditure functions. More specifically, the distribution of

the budget among the product-regions depends upon the relative slopes of

the total net consumer expenditure curves. The amount of funds allocated

to product-regions with total net expenditure functions that have rela-

tively steep slopes change more rapidly than the amount of funds allocated

to product-regions having total net expenditure functions that are less

steep when the size of the advertising budget is varied.

Since all product-regions are not included in the allocation model,

budgetary implications are not fully obvious. However, enough informa-

tion is available to draw some qualitative conclusions. By analyzing

the optimum budget allocation by individual product forms, it is seen

that few expenditures are allocated to frozen concentrated orange juice.

This is partly due to the exclusion of four frozen concentrated orange

juice equations which did not meet the statistical requirements of the
9
model. The advertising allocation to canned single strength orange

juice in the West South Central Region was the largest product-region

dollar allocation. The smallest non-zero allocation went to chilled

orange juice in the Mountain Region. Chilled orange juice included the

least number of regions of any product receiving advertising funds.

Nonetheless, allocations to chilled orange juice were large in some

regions, especially the Middle Atlantic Region.




The failure of four out of nine FCOJ equations to be satisfac-
torily estimated suggests that variables such as price, weather, and
merchandising are relatively more important determinants of consumer
FCOJ expenditures than is advertising pressure.









Canned single strength orange juice was allocated the greatest

amount of advertising expenditures in the southern regions of the United

States. Chilled orange juice allocations are the most significant in

regions having high per capital incomes. Canned single strength grape-

fruit juice allocations are strongest in the big markets in the eastern

half of the United States.

The allocation model indicates changes in the distribution of

advertising expenditures that occur when the advertising budget is less

than the unconstrained optimum budget. The results suggest that adver-

tising chilled orange juice in the Middle Atlantic Region is feasible

only when the processed product advertising budget reaches or exceeds

$3.0 million per year. Advertising of frozen concentrated orange juice

in the West North Central Region is not optimally feasible at budgetary

levels below $3.0 million per year. The level of advertising expendi-

tures for canned single strength grapefruit juice is reasonably uniform

in the New England, Middle Atlantic and South Atlantic Regions even for

wide variations in the aggregate budgets. Advertising expenditures for

canned single strength juice in the South Atlantic Region and chilled

orange juice in the Pacific Region are also highly stable at all budge-

tary levels. The stability of chilled orange juice advertising in the

Pacific Region may be partly due to the competitive situation involving

native California chilled orange juice (Table 2).

The budget allocations of Table 2 were aggregated by geographic

region and product to measure the percentage distribution of the expen-

ditures by regions and by products as the size of the advertising bud-

gets were increased. Table 3 shows the percentage distributions of the

various processed product budgets allocated by geographic region. For







27

the most part, the percentages fluctuated only slightly in each region

as the size of the budget was increased. Table 4 presents the percen-

tage distribution of the various budgets allocated among the product

forms. Frozen concentrated orange juice accounts for less than one-fourth

of the budget expenditures at the higher budget levels. Canned single

strength orange juice accounts for the largest allocation in the optimal

$4.36 million budget, followed by chilled orange juice and canned single

strength grapefruit juice. At the lower budget levels the canned juices

account for most of the allocations.


Table 3.--Processed Products: Percentage of the Florida Department of
Citrus' annual advertising budget allocated by geographic
regions for various sized budgets


Region


New England
Pacific
Mountain
West North Central
West South Central
East North Central
East South Central
Middle Atlantic
South Atlantic

TOTAL


1.0



9.7
3.8
2.5
0.0
26.3
2.1
0.1
30.7
24.8

100.0


Annual Advertising Budget
(million dollars)
2.0 3.0 4.0
percent of annual budget

13.3 13.0 12.0
2.7 2.9 2.7
1.5 1.2 1.0
0.3 4.5 7.3
25.0 24.5 22.8
15.8 17.9 17.4
1.5 1.7 2.0
19.1 16.0 18.6
20.8 18.3 16.2

00.0 100.0 100.0


4.36
-----------

11.8
2.7
1.0
7.9
22.4
17.2
2.3
19.1
15.6

100.0


1







28

Table 4.--Processed Products: Percentage of the Florida Department of
Citrus' annual advertising budget allocated by product form
for various sized budgets



Product Annual Advertising Budget
(million dollars)
1.0 2.0 3.0 4.0 4.36
------------- percent of annual budget ----------------

CSSGJ 46.5 31.2 25.3 21.5 20.6
CSSOJ 44.6 38.3 33.5 29.5 28.5
FCOJ 3.8 12.3 19.2 22.3 23.3
COJ 5.1 18.2 22.0 26.7 27.6

TOTAL 100.0 100.0 100.0 100.0 100.0



aA list containing definitions of the abbreviations used in this
table may be found in Appendix A.


Alternative Advertising Budget
Allocations for Fresh Fruit

Annual budgets of $0.5, $1.0, $1.5, $2.0 and $2.45 million were

selected for the fresh fruit allocations. The optimal unconstrained

budget was found to be $2.45 million per seven month season. The

marginal net revenue products for the fresh product-regions in solution

for the various budgets are $34.93, $23.25, $14.95, $7.09 and $0.0,

respectively, and are plotted in Figure 5. Table 5 contains the various

budget allocations for fresh fruit. Nine product-regions were omitted

since the total net response functions for four product-regions did not

conform to the sign requirements of the allocation model and five others

were nonsignificant at the .05 level.10




10Refer to McClelland [7] for the results of the fresh product allo-
cations that excluded only those product-region equations that did not
fulfill the sign requirements of the programming model.











Marginal
Net Revenue
Product
(dollars)


0.5


Advertising Budget
(million dollars)


Marginal Net Revenue Product for Fresh Product
Advertising Budgets


1.5


Figure 5.


2.5









Table 5.--Fresh Products: Monthly allocation of the Florida Depart-
ment of Citrus' annual advertising budget by product-region
for various sized budgets



Product-a Annual Advertising Budget
Region (million dollars)
0.5 1.0 1.5 2.0 2.45
------------ monthly allocation in dollars -------------

FRFLO-NE 0 1,118 3,887 6,509 8,870
FRFLG-P 0 36 3,067 5,936 8,523
FRFLG-WNC 3,675 4,756 5,525 6,253 6,909
FRFLG-WSC 0 940 2,670 4,308 5,785
FRFLO-ENC 0 11,441 22,818 33,586 43,296
FRFLG-ENC 26,495 43,663 55,877 67,436 77,861
FRFLO-MA 0 0 11,336 25,892 39,019
FRFLO-SA 13,810 19,117 22,892 26,465 29,687
FRFLG-SA 27,448 61,786 86,213 109,330 130,180


aA list containing definitions of
table may be found in Appendix A.


The results in Table 5 indicate

should be allocated more advertising


the abbreviations used in this



that fresh Florida grapefruit

funds than fresh Florida oranges.


This finding appears to be consistent with the importance of fresh

grapefruit sales to the Florida grapefruit industry relative to the

importance of fresh orange sales to the Florida orange industry.

Budget allocations in Table 5 were aggregated by geographic region

and product to measure the percentage distribution of the advertising

expenditures as the size of the fresh product advertising budget was

varied. The percentage distributions by region of the budget alloca-

tions for fresh fruit are presented in Table 6. The East North Central

and South Atlantic Regions accounted for the larger percentages of the

budgets. Percentages of the budgets allocated to the New England,

Pacific, West South Central and Middle Atlantic Regions increased as

the size of the advertising budget increased. Table 7 shows the









percentage distribution of the budgets by product. As the size of the

budgets increased, the percentage allocated to fresh grapefruit decreased.


Table 6.--Fresh Products: Percentage of the Florida Department of
Citrus' seasonal advertising budget allocated by geographic
regions for various sized budgets



Region Seasonal Advertising Budget
(million dollars)
0.5 1.0 1.5 2.0 2.45
-------- percent of seasonal budget ---------

New England 0.0 0.8 1.8 2.3 2.5
Pacific 0.0 0.0 1.4 2.1 2.4
Mountain 0.0 0.0 0.0 0.0 0.0
West North Central 5.1 3.3 2.6 2.2 2.0
West South Central 0.0 0.7 1.2 1.5 1.7
East North Central 37.1 38.6 36.8 35.3 34.6
East South Central 0.0 0.0 0.0 0.0 0.0
Middle Atlantic 0.0 0.0 5.3 9.1 11.1
South Atlantic 57.8 56.6 50.9 47.5 45.7

TOTAL 100.0 100.0 100.0 100.0 100.0


Table 7.--Fresh Products: Percentage of the Florida Department of
Citrus' seasonal advertising budget allocated by product
form for various sized budgets



Product Seasonal Advertising Budget
(million dollars)
0.5 1.0 1.5 2.0 2.45
----------- percent of seasonal budget -------------

FRFLO 19.3 22.2 28.4 32.4 34.5
FRFLG 80.7 77.8 71.6 67.6 65.5

TOTAL 100.0 100.0 100.0 100.0 100.0



A list containing definitions of the abbreviations used in this
table may be found in Appendix A.








Estimated Total Net Revenues Derived
from Alternative Budget Allocations

In order to understand the implications of the empirical allocation

schemes above, total net consumer sales that would result from these

theoretical budgets were estimated. The optimal annual budget of $4.36

million for processed products would result in total net consumer sales

of $21.4 million per month in the 26 product-regions or $257 million

annually (Table 8).11 Without any advertising expenditures, total net

consumer sales of processed products in the markets included in the

allocation model could be expected to average $19.5 million per month

or $234 million per year. Thus, the expenditure of $4.36 million for

generic advertising of processed products resulted in added net returns

of $23 million to the processed product sector. For fresh fruit the

results are even more impressive. If the $2.45 million budget were

implemented for fresh fruit, the resulting total net consumer expendi-

tures in those markets included in the model would average $16.7 million

per month for the seven month fresh fruit season or $117 million per

season (Table 9). If no generic advertising occurred, total net expen-

ditures for fresh fruit would average approximately $9.8 million per

month or $69 million per season. The optimal fresh fruit budget would

yield a differential of net consumer expenditures of $48 million for

the seven month fresh fruit season.

Comparing the difference in consumer expenditures between the pro-

cessed and fresh products with and without advertising expenditures may




11Total consumer sales for both processed and fresh products are
computed using an "average" value for the time variable, thus annual
sales are simply monthly sales multiplied by the appropriate number of
months in the season.













Table 8.--Processed Products: Monthly total net consumer sales by product-regions due
for various sized budgets


to optimum generic advertising


Product-a Annual Advertising Budget
Region (million dollars)
1.0 2.0 3.0 4.0 4.36
--------------------- monthly net consumer sales in thousands of dollars ---------------------


CSSGJ-NE
CSSOJ-NE
FCOJ-NE
COJ-NE
CSSGJ-P
COJ-P
CSSGJ-M
CSSOJ-M
COJ-M
CSSOJ-WNC
FCOJ-WNC
COJ-WNC
CSSOJ-WSC
FCOJ-WSC
COJ-WSC
CSSOJ-ENC
COJ-ENC
CSSGJ-ESC
FCOJ-ESC
COJ-ESC
CSSGJ-MA
FCOJ-MA
COJ-MA
CSSGJ-SA
CSSOJ-SA
COJ-SA
TOTAL


114
154
1,720
692
284
743
92
88
48
196
1,964
154
374
1,870
146
418
707
168
72
173
551
6,555
1,788
458
533
486
20,548


108
163
1,759
727
286
748
89
88
54
195
1,964
157
361
1,970
164
503
754
169
92
165
497
6,627
1,802
505
515
533
20,995


101
170
1,763
752
291
751
85
85
62
194
1,980
171
312
2,067
173
562
749
165
107
159
450
6,677
1,821
534
486
565
21,232


96
175
1,754
771
292
752
81
84
68
192
1,984
185
262
2,128
180
604
722
158
122
153
418
6,700
1,856
553
455
587
21,332


95
176
1,748
778
292
752
78
83
71
192
1,981
189
238
2,149
181
628
689
156
132
149
406
6,708
1,861
559
444
672
21,407


aA list containing definitions of the abbreviations used in this table may be found in Appendix A.









Table 9.--Fresh Fruit: Monthly total net consumer sales by product-
regions due to optimal generic advertising for various
sized budgets



Product-a Annual Advertising Budget
Region (million dollars)
0.5 1.0 1.5 2.0 2.45
monthly net consumer sales in thousands of dollars

FRFLO-NE 568 595 648 677 686
FRFLG-P 515 516 574 605 622
FRFLG-WNC 874 906 920 929 931
FRFLG-WSC 146 170 203 221 226
FRFLO-ENC 1,577 2,171 2,466 2,571 2,520
FRFLG-ENC 2,513 2,683 2,697 2,617 2,446
FRFLO-MA 2,728 2,728 2,932 3,092 3,139
FRFLO-SA 2,552 3,567 4,251 4,869 5,403
FRFLG-SA 1,509 1,648 1,502 1,178 729

TOTAL 12,982 14,984 16,193 16,759 16,702


aA list containing
table may be found in


definitions
Appendix A.


of the abbreviations used in this


indicate fresh fruit advertising expenditures are more efficient in

generating net revenue. Comparisons of this sort, however, are produc-

tive only when the marginal net revenue products are equal for both

fresh and processed products. Hence, only the $4.36 million processed

product budget can be compared to the $2.45 million fresh fruit budget

since the marginal net revenue products for each product-region in

solution in both allocations are zero.

Selling costs associated with the fresh fruit allocations in the

study were mass media advertising expenditures, but a significant amount

of local retail store promotions are associated with the marketing of

fresh fruit. If the costs of these local retail promotions had been

included, the resultant allocations might have indicated that fewer mass

media dollars should have been used to advertise fresh citrus fruit.









Composite Advertising Budget Allocations

Fresh and processed products were combined to determine how the

advertising allocations from a composite allocation scheme differed from

the separate allocations presented above. The results of these alloca-

tions are presented in Table 10. The seasonal budgets used were $4.5,

$6.0 and $6.81 million. These budget constraints were defined as simply

the summation of the three largest budgets for processed and fresh pro-

ducts when those two categories of products are treated separately. The

$6.81 million budget is the composite of the unconstrained allocations

when marginal net revenue products are zero. Marginal net revenue pro-

ducts for the other two allocations were $4.37 and $1.41, respectively.

Fresh fruit products were awarded more advertising dollars in the

composite allocations than they were awarded independently. Increased

expenditures to the fresh products may appear inconsistent since the

actual percentage of utilization of the Florida citrus crop in fresh form

is much less than the utilization in processed forms. These findings

are, in part, due to the structure of the sampled data. The fresh fruit

data were reported only seven months per year while data were available

for twelve months per season for the processed products. If both data

series had been reported on a common time period basis, the cross product

and advertising lag effects could have been estimated in a more comparable

manner.

Two of the factors that limit the size of the processed product

allocations and total net consumer expenditures are the number and signs

of the cross product advertising variables. The processed product model

has two or three cross product variables in each product-region which in

most cases have one or more negative coefficients that are large in mag-

nitude. The net effect is that these negative cross products limit the










Table 10.--Monthly allocation of the Florida Department of Citrus'
annual advertising budget by product-region for various
sized budgets combining processed and fresh products



Product-a Annual Advertising Budget
Region (million dollars)
4.5 6.0 6.81
-------- monthly allocation in dollars ----------

CSSGJ-NE 5,312 5,805 6,039
CSSOJ-NE 0 0 0
FCOJ-NE 14,875 29,663 36,700
COJ-NE 0 0 0
FRFLO-NE 7,41.5 8,401 8,870
CSSGJ-P 354 3,500 4,998
COJ-P 3,699 4,387 4,714
FRFLG-P 6,930 8,009 8,523
CSSGJ-M 1,076 1,291 1,393
CSSOJ-M 1,390 1,692 1,938
COJ-M 0 241 369
CSSOJ-WNC 0 0 0
FCOJ-WNC 0 14,232 25,960
COJ-WNC 277 1,977 2,786
FRFLG-WNC 6,505 6,779 6,909
CSSOJ--WSC 35,669 53,066 61,345
FCOJ-WSC 2,412 13,788 19,969
COJ-WSC 0 0 0
FRFLG--WSC 4,875 5,492 5,785
CSSOJ-ENC 2,475 4,716 5,782
COJ-ENC 20,530 45,177 56,905
FRFLO-ENC 0 41,368 43,296
FRFLG-ENC 0 75,791 77,861
CSSGJ-ESC 2,157 4,798 6,504
FCOJ-ESC 0 0 1,953
COJ-ESC 0 0 0
CSSGJ-MA 30,918 37,640 40,839
FCOJ-MA 0 0 0
COJ-MA 0 10,854 28,446
FRFLO-MA 30,936 36,413 39,019
CSSGJ-SA 10,000 13,520 15,196
CSSOJ-SA 20,679 29,922 34,320
COJ-SA 1,998 5,437 7,074
FRFLO-SA 27,703 29,047 29,687
FRFLG-SA 117,340 126,040 130,180



aA list containing definitions of the abbreviations used in this
table may be found in Appendix A.








magnitude and number of the advertising allocations to processed pro-

ducts in solution.

Cross product effects in the fresh fruit model are limited to at

most one variable, and the cross product terms are for the most part

positive and smaller than the own product coefficient. Therefore, the

net results of the cross product effects in the fresh fruit model are

positive, while they are negative in the processed product model. Some

improvement could be made in the processed product model with a greater

knowledge of the true cross product effects as well as the lagged effects

of advertising within each product-region.


A Comparison of Historical and Theoretical
Advertising Budget Allocations

In an effort to gain further insight into the efficiency of histori-

cal advertising budget allocations, several representative budgets were

optimally allocated, and the results were compared with the actual DOC

allocation. Results of these allocations are presented in Tables 11 and

12. To represent a large crop year the 1966-67 budget was chosen, to

represent a medium-sized budget the mean of the seven years of budgets

was calculated and to represent a relatively small crop year the 1965-66

budget was selected. Table 11 shows both the actual and constrained

optimum allocations for all three processed product budgets. The adver-

tising budgets reflect the actual level of expenditures for the particular

seasons. Marginal net revenue products for the optimum 1966-67, mean

1960-67 and 1965-66 allocations were calculated to be $1.25, $4.64 and

$5.74, respectively, for each product-region in solution.

Using the same three budget periods, the actual and optimum alloca-

tions for the fresh fruit products were compared in Table 12. The

marginal net revenue products were $29.50, $33.12 and $31.37 for the












Table 11.--Processed Products: Actual and optimum monthly advertising allocations of
annual advertising budget by product-region for selected budgets


the Florida Department of Citrus'


Product-a Monthly Budget Allocation
Region 1966-67 Budget Mean 1960-67 Budgetb 1965-66 Budget
Actual Optimum Actual Optimum Actual Optimum
------------------------------------------- dollars ----------------------------------------
CSSGJ-NE 0 5,831 1,006 5,266 440 5,083
CSSOJ-NE 0 0 844 0 679 0
FCOJ-NE 23,954 30,455 12,158 13,497 10,063 8,014
COJ-NE 10,707 0 2,594 0 1,369 0
CSSGJ-P 0 3,669 1,946 61 1,054 0
COJ-P 0 4,424 950 3,635 611 3,380
CSSGJ-M 0 1,302 597 1,056 351 977
CSSOJ-M 0 1,708 671 1,362 541 1,250
COJ-M 0 256 353 0 202 0
CSSOJ-WNC 3,710 0 2,208 0 1,082 0
FCOJ-WNC 22,505 15,551 14,430 0 12,239 0
COJ-WNC 3,504 2,068 1,342 118 403 0
CSSOJ-WSC 6,486 53,998 2,532 34,046 1,351 27,598
FCOJ-WSC 18,323 14,397 11,834 1,352 11,657 0
COJ-WSC 1,954 0 1,289 0 497 0
CSSOJ-ENC 8,806 4,836 4,451 2,266 2,704 1,436
COJ-ENC 27,828 46,497 7,300 18,232 5,380 9,096
CSSGJ-ESC 991 4,939 920 1,911 612 932
FCOJ-ESC 9,304 0 6,481 0 6,231 0
COJ-ESC 0 0 516 0 346 0
CSSGJ-MA 10,111 38,000 4,706 30,291 1,668 27,799
FCOJ-MA 82,062 0 45,182 0 38,234 0
COJ-MA 39,434 12,833 10,985 0 7,852 0
CSSGJ-SA 2,375 13,709 2,262 9,671 1,313 8,366
CSSOJ-SA 8,701 30,417 3,600 19,817 2,028 16,391
COJ-SA 9,756 5,621 3,101 1,677 1,817 402

TOTAL 290,511 290,511 144,258 144,258 110,724 110,724


aA list containing definitions of the abbreviations used in this table may be found in Appendix A.

bMean 1960-67 budget is the mean monthly advertising expenditures for the period July 1960 through June 1967.











Table 12.--Fresh Products: Actual and optimum monthly advertising allocations of the Florida Department
of Citrus' annual advertising budget by product-region for selected budgets



Product-a Monthly Budget
Region b
Region 1966-67 Budget Mean 1960-67 Budget 1965-66 Budget
Actual Optimum Actual O mm Actual OptimumActualO
-------------------------------------- dollars ---------------------------------------

FRFLO-NE 6,026 0 3,842 0 3,609 0
FRFLG-P 3,289 0 5,339 0 8,134 0
FRFLG-WNC 2,612 4,178 4,156 3,842 5,067 4,004
FRFLG-WSC 1,603 0 3,183 0 3,884 0
FRFLO-ENC 23,531 2,888 13,977 0 15,202 322
FRFLG-ENC 16,211 34,482 14,646 29,154 17,735 31,727
FRFLO-MA 29,295 0 18,617 0 19,773 0
FRFLO-SA 10,848 16,279 8,963 14,632 8,324 15,428
FRFLG-SA 7,834 43,422 7,674 32,769 7,666 37,913

TOTAL 101,249 101,249 80,397 80,397 89,394 89,394



A list containing definitions of the abbreviations used in this table may be found in Appendix A.

bMean 1960-67 budget is the mean monthly advertising expenditures for the seven month period November
through May, 1960-1967.








1966-67, mean 1960-67 and 1965-66 budgets, respectively. The 1965-66

budget for fresh fruit was not the smallest of the budgets as was the

case for the processed products.

Calculated total net consumer sales for each processed product bud-

get allocation are reported in Table 13. In each case the theoretical

total net consumer sales are greater than the actual total net revenues.

Total net consumer sales for each fresh product budget are reported in

Table 14. In each case the calculated optimum sales revenues are greater

than the calculated actual revenues.

In terms of the three situations and upon analyzing and considering

both fresh and processed products, the 1966-67 budget was misallocated

the most, if misallocation is measured by the difference between actual

and optimum total net consumer sales. Total consumer sales in the 35

product-regions could have theoretically generated an additional $21

million if the theoretically optimum budget allocation had been applied

during the 1966-67 season.


Limitations of the Allocation Model

The major limitations are derived from the initial assumptions set

forth, the data series that were unavailable for use in the study, the

econometric limitations in estimating the total consumer expenditure

functions in each product-region and the implementation of the total

net expenditure functions in the allocation model.

In conducting any empirical study certain explicit assumptions have

to be made so that given economic and behavioral variables can be mea-

sured and manipulated within the analytic framework developed. It was

assumed, for example, that all advertising expenditures, regardless of

the copy or media purchased, generated sales with equal efficiency.

Given the availability of media advertising response information, the













Table 13.--Processed Products: Total net consumer sales for the actual and optimum monthly allocation of the Florida
Department of Citrus' advertising budget by product-region for selected budgets


Product-a Total Net Consumer Sales
Region 1966-67 Budget Mean 1960-67 Budgetb 1965-66 Budget
Actual Optimum Actual Optimum Actual Optimum
-------------------------------------- thousand dollars ---------------------------------------
CSSGJ-NE 136 99 128 109 120 112
CSSOJ-NE 97 172 99 161 97 157
FCOJ-NE 1,553 1,760 1,699 1,753 1,718 1,738
COJ-NE 629 762 630 718 618 704
CSSGJ-P 294 292 298 283 297 284
COJ-P 687 751 711 747 704 745
CSSGJ-M 93 84 91 90 92 91
CSSOJ-M 89 85 85 88 84 88
COJ-M 35 65 25 52 20 50
CSSOJ-WNC 187 193 195 196 194 196
FCOJ-WNC 1,914 1,984 1,893 1,965 1,956 1,965
COJ-WNC 177 178 171 155 163 154
CSSOJ-WSC 300 289 300 369 301 376
FCOJ-WSC 1,876 2,098 1,840 1,936 1,841 1,896
COJ-WSC 115 176 114 161 111 154
CSSOJ-ENC 539 583 467 484 453 449
COJ-ENC 712 739 711 748 706 731
CSSGJ-ESC 156 163 157 169 158 169
FCOJ-ESC 113 87 79
COJ-ESC 161 157 168 167 168 170
CSSGJ-MA 657 435 631 511 617 533
FCOJ-MA 6,418 6,689 6,354 6,610 6,317 6,581
COJ-MA 1,690 1,841 1,711 1,798 1,707 1,793
CSSGJ-SA 444 544 402 494 387 475
CSSOJ-SA 508 472 513 521 509 530
COJ-SA 546 576 533 521 519 501
TOTAL 20,013 21,300 19,926 20,893 19,857 20,721


aA list containing definitions of the abbreviations used in this table may be found in Appendix A.

bMean 1960-67 budget is the mean monthly advertising expenditures for the period July 1960 through June 1967.









Table 14.--Fresh Products: Total net consumer sales for the actual and optimum monthly allocations of the
Florida Department of Citrus' advertising budget by product-region for selected budgets



Product-a Total Net Consumer Sales
Region 1966-67 Budget Mean 1960-67 Budgetb 1965-66 Budget
Actual Optimum Actual Optimum Actual Optimum
--------------------------------- thousand dollars----------------------------------

FRFLO-NE 674 568 648 568 644 568
FRFLG-P 585 515 611 515 624 515
FRFLG-WNC 822 895 884 884 905 889
FRFLG-WSC 190 146 215 146 224 146
FRFLO-ENC 1,819 1,825 1,657 1,635 1,745 1,701
FRFLG-ENC 2,506 2,606 2,433 2,544 2,500 2,572
FRFLO-MA 3,113 2,728 3,026 2,728 3,039 2,728
FRFLO-SA 2,148 3,032 2,076 2,713 2,051 2,868
FRFLG-SA 1,318 1,623 1,301 1,557 1,296 1,594

TOTAL 13,175 13,938 12,851 13,290 13,028 13,581



aA list containing definitions of the abbreviations used in this table may be found in Appendix A.

Mean 1960-67 budget is the mean monthly advertising expenditures for the seven month period November
through May, 1960-1967.









budget constraint equation in the allocation model could have been

weighted to reflect varying advertising expenditure efficiencies by

product-region.

From a marketing standpoint the unavailability of brand advertising

data of citrus products on a regional basis limits the potential appli-

cation of the results of the allocation model. Exclusion of these data

in the measurement of mass media advertising effects leads one to have

some reservations regarding the quantitative conclusions. The results

do, however, indicate the direction of advertising expenditure reallo-

cation necessary to increase total net consumer expenditures.

Since the allocation model utilized the estimated total sales or

response functions, the limitations of the regression model are reflected

in the results of the allocation model. Aside from recognized econome-

tric limitations of the method of least squares regression, little is

known about the cross product effects of advertising or the lagged

responses to advertising or the lagged responses to advertising within

regions. Therefore, monthly estimates of the lagged advertising expen-

diture coefficients may not reflect the true advertising responses as

shorter time intervals may be required to estimate lagged response.

Also, estimation of the cross product coefficients have a direct influ-

ence on the allocation to any region, and any a priori information of

cross product advertising response characteristics would have helped in

the estimation of these coefficients.

Results of the allocation model are of limited scope since all

product-regions were not represented in the programming model. This

was because 16 of the estimated total expenditure equations were either

not significant at the .05 level of significance or did not meet the

sign requirements of the allocation model. Three other product-regions







44

were eliminated because the estimated cross product relationships did

not conform to the requirements of the allocation model.

As specified, the allocation model is a static model in that the

calculated marginal net revenue products are based upon given data

series and a fixed time period. If consumer responses change, optimal

allocations of the advertising budget may also change. Consumer res-

ponse characteristics could change due to supply or price changes and

numerous other factors. These limitations are primarily due to the

fact that the response equation was set up as a function of advertising

expenditures exclusively. Ideally, the response equation should be

formulated in terms of product prices, branded and generic advertising

expenditures and other relevant variables.

Despite the various limitations and research complexities, a use-

ful generic advertising model is identified. The empirical results

demonstrate potential benefits to the Florida citrus industry from esti-

mating advertising response functions, applying a marginal decision rule

and optimally allocating a fixed advertising budget over several related

products and nine geographic markets.


Future Research Recommendations

Further refinement of the model developed could be even more useful

to the Florida Department of Citrus. Additional work will be necessary

in obtaining sales and advertising data observed on a weekly or biweekly

basis so that consumer response to advertising might be more accurately

estimated. Improved data samples might also enable more precision in

estimating the consumer advertising response curves. This would lead

to a greater knowledge of the direct and cross product advertising res-

ponse characteristics which exist within each region. These recommendations






45

would greatly improve the estimating technique so that it could become

a more reliable decision tool.

It is questionable whether secondary data sources can, in general,

provide sufficient information. If this is the case, it is recommended

that advertising responses be measured from data collected via controlled

advertising experiments in the major market areas. Carefully designed

experiments could possibly provide the primary data necessary to measure

direct promotional elasticities and also the cross product effects of

advertising and advertising lags. Improved knowledge of consumer response

to advertising within each region would result in more accurate optimum

allocations. The costs of experimental advertising research are enor-

mous, however, when compared with time series approaches.

In future research studies of this type it is recommended that data

series of brand advertising expenditures for Florida and other natural

citrus products and for branded imitation and synthetic citrus products

be included. Inclusion of these data would permit the measurement of

the impact of generic advertising versus the impact of brand advertising.

Due to the lack of data the problem of the timing of advertising

expenditures was ignored. With the improved collection and classifica-

tion system of advertising data as recently established by the Florida

Department of Citrus, it is recommended that models be developed to

determine the optimum weeks or periods within a given season for generic

advertising outlays.

Future research should also determine the consumer response to

various advertising media. Such studies would provide the necessary

information for allocating the budgets by products and by regions, as

well as by advertising media.






46

By developing a long-run research program to study the direct and

cross product effects of advertising, advertising lags, brand versus

generic advertising, the timing of advertising expenditures and consumer

response to advertising media, the Florida citrus industry would be in

a position to more efficiently manage its advertising resources and to

take advantage of regional differences in the United States retail

market for individual citrus products.


SUMMARY AND INDUSTRY IMPLICATIONS

This research represents a "first attempt" to develop a quantita-

tive model to aid Department of Citrus decision makers formulate policy

decisions regarding the allocation of limited advertising funds. Since

it is a first effort, there are many limitations which preclude the use

of exact numerical results as the basis for policy decisions. The study

is very useful, however, as a source of general policy guidelines. The

results point out those directions of re-allocation which will be of

most benefit to the Florida citrus industry. This section summarizes

those adjustments which should occur in the allocation of advertising

expenditures by products and regions in order to increase total consumer

sales of Florida citrus products. The recommended adjustments are in

terms of deviations from the actual allocations as they occurred in the

1960 through 1960 period.


Processed Product Advertising

The proportions of the total processed product advertising budget

allocated to various regions for selected budget levels are presented

in Table 15. Both actual and optimal allocations are given. The results

suggest several conclusions regarding adjustments in the historical bud-

get allocation pattern.








Table 15.--Actual and optimum proportions of the advertising budget
allocated by regions for processed products at selected
budget levels


Region


New England
Pacific
Mountain
West North Central
West South Central
East North Central
East South Central
Middle Atlantic
South Atlantic


Budget Sizea
$1.3 mil. $1.7 mil. $3.5 mil.
Actual Optimum Actual Optimum Actual Optimum
--------------------- percent ---------------------

11.3 11.8 11.5 13.0 11.9 12.5
1.5 3.0 2.0 2.6 0.0 2.8
1.1 2.0 1.2 1.7 0.0 1.1
12.4 0.0 12.5 0.1 10.2 6.1
12.2 24.9 10.8 24.5 9.2 23.5
7.3 9.6 8.1 14.2 12.6 17.7
6.5 0.9 5.5 1.3 3.6 1.7
43.1 25.1 42.2 21.0 45.3 17.5
4.6 22.7 6.2 21.6 7.2 17.1


aThese budgets correspond to the actual advertising budgets for pro-
cessed products for the 1965-66, average 1960-67 and 1966-67 seasons,
respectively. The total dollar amounts only reflect expenditures for
those product-markets included in the model.


Expenditures should be decreased from historical proportions of the

total budget in the following regions: Middle Atlantic, East South Cen-

tral and West North Central. Expenditures should be increased from his-

torical proportions of the total budget in the East North Central, South

Atlantic and West South Central Regions. Expenditures should be main-

tained relatively the same as historical proportions in the Northeast,

Mountain and Pacific Regions.

As the total advertising budget available for advertising processed

citrus products increases, the proportions of the budget going to various

regions should vary according to the following scheme. The proportions

going to the Northeast, West South Central, Mountain and Pacific Pegions

should remain relatively constant at all total budget levels. The pro-

portions going to the Middle Atlantic and South Atlantic Regions should








decrease as the total budget increases. The proportions going to the

East North Central, East South Central and West North Central Regions

should increase as the total budget increases.

The optimum solutions indicate that not all regions should receive

equal proportions of the total budget, but that all nine regions can be

separated into three groups with the regions in each group receiving

approximately equal proportions of the total budget. Regions in Group

I, consisting of the East South Central, West North Central, Mountain

and Pacific Regions, should each receive only small proportions of the

total budget. Regions in Group II, consisting of the New England and

East North Central Regions, should each receive proportions approxi-

mately six times as large as those allocated to Group I. Regions in

Group III, consisting of the Middle Atlantic, South Atlantic and West

South Central Regions, should each receive proportions about twice as

large as those proportions allocated to Group II.

The proportions of total advertising expenditures going to each of

the processed products under actual and optimal budget allocations are

presented in Table 16. Several major discrepancies between the histo-

rical allocation pattern and the optimal pattern are evident. Histori-

cally, FCOJ has received over 50 percent of the entire advertising bud-

get, with the proportion decreasing as the total budget increases. The

optimal solution suggests that the proportion allocated to FCOJ should

increase as the available budget increases and that the total proportion

allocated to FCOJ should be around the 20 percent level at the high

total budget levels.

Another implication that can be inferred from Table 16 is that at

the high budget level, which most nearly reflects current DOC expendi-

ture levels, all products should receive approximately equal proportions








Table 16.--Actual and optimum proportions of the advertising budget
allocated by product for processed products at selected
budget levels



Product Budget Sizea


$1.3 mil. $1.7 mil. $3.5 mil.
Actual Optimum IActual Optimum IActual Optimum


--------------------- percent ------------------

Frozen Concen-
trated 0. J. 70.8 7.2 62.4 10.3 53.7 20.8
Chilled O. J. 16.7 11.6 19.7 16.4 32.1 24.7
Canned O. J. 7.6 42.2 9.9 39.8 9.6 31.3
Canned G. J. 4.9 39.0 8.0 33.5 4.6 23.2


aSee footnote at end of Table 15.


of the total processed products advertising budget. It is interesting

to note that since the completion of this study the Department of Citrus

has embarked on a mass media advertising program which equally empha-

sizes all three forms of orange juice. By doing this the Department has

effectively equated the advertising expenditures spent for each of the

three orange juices.

A somewhat surprising implication of the allocation model is that

as the total available budget decreases, a larger proportion of the bud-

get should be spent on advertising the canned juices. Although contrary

to actual industry performance, this is consistent with previous research

results that indicate more elastic demands for the canned juices [8, 11].

Sales of products with elastic demands are more subject to erosion from

other related products, therefore, a more or less constant level of pro-

motional pressure is needed.









Fresh Product Advertising

The proportions of the total fresh product advertising budget allo-

cated to various regions for selected budget levels are presented in

Table 17. Only seven regions are included in the Table because adequate

advertising response functions were not attained for the East South Cen-

tral and Mountain Regions. Data limitations appear more severe with the

fresh product segment than with the processed product segment, thus, the

result must be interpreted with a fair degree of caution.


Table 17.--Actual and optimum proportions of the advertising budget
allocated by regions for fresh products at selected
budget levels


Region


New England
Pacific
West North Central
West South Central
East North Central
Middle Atlantic
South Atlantic


Budget Sizeb

$560 thou. $630 thou. $700 thou.
Actual Optimum Actual Optimum Actual Optimum
--------------------- percent ------------------

4.7 0.0 4.0 0.0 6.0 0.0
6.6 0.0 9.1 0.0 3.3 0.0
5.2 4.8 5.7 4.5 2.6 4.1
4.0 0.0 4.4 0.0 1.6 0.0
35.6 36.3 36.8 35.8 39.2 36.9
23.2 0.0 22.1 0.0 28.9 0.0
20.7 58.9 17.9 59.7 18.4 60.0


aThe East South Central and Mountain regions were not included due to
inadequate advertising response equations.

bThese budgets correspond to the actual advertising budgets for fresh
products for the average 1960-67, 1965-66 and 1966-67 seasons, respec-
tively. The total dollar amounts only reflect expenditures for those
product-markets included in the model.


The optimum allocations suggest that most of the fresh products bud-

get be allocated to the East North Central and South Atlantic Regions,

with the South Atlantic receiving over 1.5 times the proportion going to

the East North Central Region. Historically, the proportions allocated







51

to the East North Central and West North Central Regions are extremely

consistent with the indicated optimum allocations. The results suggest

that considerably fewer funds should be allocated to the Middle Atlantic

Region and expenditures should be nearly tripled in the South Atlantic

Region, compared to historical allocations.

Table 18 contains the proportions of advertising expenditures going

to fresh oranges and fresh grapefruit, respectively, at selected budget

sizes. On the average, the actual budget has been split fairly evenly

between fresh oranges and fresh grapefruit (Table 18, Col. 1). The

optimum allocations suggest that there should be roughly an 80-20 ratio

with grapefruit getting the larger proportion of the budget. Also, this

ratio appears to be very stable over a wide range of budget sizes.


Table 18.--Actual and optimum proportions of the advertising budget
allocated by product for fresh products at selected budget
levels



Product Budget Sizea


$560 thou.
Actual Optimum


$630 thou. $700 thou.
Actual Optimum Actual Optimum


----------------------- percent -----------------------

Oranges 56.5 18.2 52.5 17.6 68.8 18.9
Grapefruit 43.5 81.8 47.5 82.4 31.2 81.1



aSee footnote b at end of Table 17.







































APPENDICES









APPENDIX A


List of Abbreviations


The list of

CSSGJ

CSSOJ

FCOJ

COJ

FRFLO

FRFLG

CFO

CFG

NE

P

M

WNC

WSC

ENC

ESC

MA

SA

DOC


abbreviations used throughout this study are defined as:

- Canned single strength grapefruit juice

- Canned single strength orange juice

- Frozen concentrate orange juice

- Chilled orange juice

- Fresh Florida oranges

- Fresh Florida grapefruit

- California fresh oranges

- California fresh grapefruit

- New England Region

- Pacific Region

- Mountain Region

- West North Central Region

- West South Central Region

- East North Central Region

- East South Central Region

- Middle Atlantic Region

- South Atlantic Region

- Department of Citrus


Conversion Ratios


The following conversion ratios were used throughout this study:

128 fluid ounces = 1 fluid gallon

1 quart frozen concentrated orange juice = 1 fluid gallon

single strength juice










16.72 dozen fresh Florida oranges = 1.6 bushel box

6.595 dozen fresh Florida grapefruit = 1.6 bushel box

2.88 dozen fresh Florida oranges = 1 fluid gallon single

strength juice

1.377 dozen fresh Florida grapefruit = 1 fluid gallon single

strength juice

3.75 dozen fresh California oranges = 1 fluid gallon single

strength juice

1.42 dozen fresh California grapefruit = 1 fluid gallon single

strength juice


APPENDIX B

Advertising Data Aggregation

All the data used in this study were reported on regional and

monthly basis with the exception of advertising expenditure data. Since

these data were recorded by date of expenditure, product type and media

utilized, they had to be aggregated by region and by months for each

product in accordance with the model formulated.

Advertising media costs are composed of circulation and production

costs. In economic terms circulation costs are variable costs and pro-

duction costs are fixed costs. For newspaper, Sunday supplements, maga-

zines and outdoor advertising, circulation costs are proportional to the

size and position of the space purchased within a given medium. For

radio and television, circulation costs vary with amount of broadcast

time and time of transmission. Production costs accrue in the design,

make-up and copy of a given advertisement and are exhausted during the

period in which the advertisement is circulated.







55

The circulation costs incurred by newspaper advertising were assigned

to the region in which the newspaper was published. Production costs

were proportionally allocated by the number of participating newspapers

within a given region.









REFERENCES


[1] Bass, F. M., et. al., editors, Mathematical Models and Methods in
Marketing, Homewood, Illinois: Richard D. Irwin, Inc., 1961.

[2] Boot, John C. G., Quadratic Programming, Amsterdam: North-Holland
Publishing Company and Chicago: Rand McNally and Company, 1964.

[3] Chung, An-Min, Linear Programming, Columbus, Ohio: Charles E.
Merrill Book, Inc., 1963.

[4] Florida Citrus Commission. Seasonal Advertising Expenditure Files.
Lakeland, Florida, Unpublished, July 1960 through June 1967.

[5] Florida Citrus Commission. State of Florida Citrus Laws. Lakeland,
Florida, December 1965.

[6] Florida Citrus Mutual. Annual Statistical Report. Lakeland,
Florida, 1960-61 through 1966-67 Issues.

[7] McClelland, E. L., "Optimal Allocation of the Florida Citrus Indus-
try's Generic Advertising Budget," Unpublished Ph.D. Dissertation,
University of Florida, 1969.

[8] Myers, L. H., The Consumer Demand for Orange Beverages, Report No.
FCC-ERD 69-1, Economic Research Department, Florida Department of
Citrus, Lakeland, Florida, 1969.

[9] Nerlove, Marc, and Frederick V. Waugh, "Advertising Without Supply
Control: Some Implications of a Study of the Advertising of Oranges,"
Journal of Farm Economics, XLIII (November 1961), 813-837.

[10] U. S. Department of Labor, Bureau of Statistics. Consumer Price
Index. Washington, D. C.: U. S. Government Printing Office, July
1960 through June 1967 Issues.

[11] Weisenborn, D. E., W. W. McPherson, and Leo Polopolus, Demand for
Florida Orange Products in Foodstore, Institutional, and Export
Market Channels, Fla. Agr. Exp. Sta. Bull. 737, May 1.970.

[12] Zentler, A. P., and Dorothy Ryde, "An Optimum Geographical Distri-
bution of Publicity Expenditure in a Private Organization," Manage-
ment Science, 2(4): 337-352, July 1956.




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