Michigan State University Extension
Tourism Educational Materials - 33710083
06/06/02
Evaluating Tourism Advertising:with Cost Comparison Methods
Source: Minnesota
ID: CD-FO-3372
Format: Full Text
Author: Koth, Barbara
Year: 1988
A travel experience doesn't begin or end at the
destination. Potential visitors anticipate the trip. During
planning they use a variety of information sources to make
travel decisions-recommendations from friends and
relatives, newspaper articles, media advertisements, and
information brochures. Travelers make choices enroute. The
challenge for tourism businesses and promotion
organizations is to influence the decision process in their
In travel advertising, evaluation of this information
collection and decision process is called "inquiry
conversion." First, an interested party calls or writes to
ask for more details after seeing an ad. Later,"conversion"
can be calculated to indicate the portion of
inquirers exposed to advertising who visit. How many
prospects actually become guests; what does it cost to
attract them?
Advertising evaluation allows you to make adjustments in
your marketing program to spend advertising dollars where
they are most cost effective. When you know what the
dollar costs are to generate travel business and can
compare costs among different forms of advertising, you can
efforts to formats that show the greatest return. For exampl
Minnesota Office of Tourism gets overnight
reports on telephonei nquiries generated by out-of-state
television ads. They know in running ad campaigns when
responses have peaked and are able to change strategies for
efficiency.
Use of cost-comparison methods reflects a view of
advertising as an investment. In the long run, advertising
must increase profit margins to more than offset
advertising expenditures. Costs must be tied to results to
avoid draining profits and reserves.
There is one caution: in tourism advertising, there often
is a long lag time in building consumer awareness of and
interest in going to a destination. Evaluation figures are
not the absolute measure of success. If evaluation shows
little consumer action, an ad program may still be building
significant consumer awareness. It may be arppropriate to
to take a long-term risk and maintain a consistent
advertising campaign that looks toward future business.
Watch cost- comparison figures, but use them as only one
tool to measure progress toward accomplishing your
marketing objectives.
The time lag in consumer response and the length of the
inquiry -conversion process means that most businesses and
destination areas use evaluation results to adjust
advertising programs for the next season.
Unless you know from past experience the relationship
between the level of inquiry and eventual bookings, it's
difficult to make immediate adjustments in advertising
schedules and formats.
To assess your advertising, it is important to spend some
time on evaluation design and in learning the various
cost-comparison methods.
Designing the Evaluation
Before you make decisions about advertising design and how
to "code" ads, some evaluation basics are in order:
- Establish evaluation procedures in advance. Evaluation
is ongoing, not an end-of-the-season, last-minute task. The
information collected and the format used should
allow you to answer specific evaluation questions that are
set ahead of time.
- Monitor and evaluate results at specified times.
- Keep good records. Update files regularly.
- Consider using a personal computer to organize the
information.
Investigate data analysis and word processing (for
mailing and inquiry lists) software packages that can
provide a simple structure to organize data.
- Compare the actual results from advertising with
marketing objectives that can be measured, contain specific
actions, and specify a time frame. Above all, be
realistic.
Creating Ads to Encourage Response
The easiest way to begin to track the advertising impact is
record the responses you receive from each ad. Most
businesses and communities use a variety of media, rather
than a single source, to get their message out to the
public. The advertising components that you choose -
brochures, newspaper ads, direct mail, and radio-should
work together for broad coverage of the target markets
previously identified. The Minnesota Extension Service
Tourism Center publication, "Tourism Advertising: Some
Basics" outlines media selection and placement strategies.
your county extension agent for a copy.
The key to success is that people must respond.
Once you have the name and address of an interested party,
you can follow through on evaluation. Give potential
visitors a reason and a way to contact you.
* Ads might feature the availability of a brochure,
vacation planniilg packet or free information. For example,
Minnesota's promotional campaign is based on distribution
of the Minnesota Explorer newspaper as an information
source that "sells" the state.
* Offer an incentive to act by providing discounts,
coupons, promotional drawings and free gifts (for example,
one day boat rental for mentioning your ad) that are
redeemable at your business or in the community (make
arrangements to get names and addresses from retail
establishments that participate). The contest to guess the
spring date the first ship will pass under the Aerial Lift
Bridge in Duluth to open the shipping season uses this
strategy.
* Toll-free numbers, self-mailers or addressed envelopes,
though expensive, remove some time and cost barriers for
potential visitors and make it easier for them to contact
you.
The advantage of incentives is that they can convince new
customers to try your attraction or service. With an
evaluation program, you know the best sources of growth in
your customer base.
Coding Advertisements
If you have more than one ad running at a time or are using
with a long shelf life, it is critical to know the
exact source of inquiries. Which newspaper ad (in what
edition?), radio spot (which station?) or television
commercial (which channel?) brings response? This
information is obtained by "coding" ads to distinguish them
each other:
* List telephone extensions that are unique to each
publication or station, with the same basic phone number.
An alternative is to have the person who answers your
business phone ask each caller, "Where did you see our
ad?," and record that information.
* Change the post office box number ending for each
publication or station, but use the same basic address. To
illustrate, P.0. Box 1OOW might be the November 11 ad in
the Winnipeg newspaper, and Box 1OOF might refer to an ad
placed the same date in the Forgo daily.
* Follow the same strategy with coupons, or place a special
or numeric code in the corner of each coupon to be
returned.
* If you purchase a list for direct mail, the printed
material that goes out can also be phone-, address-, or
coupon-coded so responses from each mailing list are
unique.
* The same procedure also works for sports shows and
directories: provide slightly different contact information
each. Then keep a list of what you sent where.
Setting up a Data Base
Too often there is little or no follow through in
evaluation. It needs to be a business and organizational
priority. Decide who has responsibility for recording and
organizing inquiry and response information as the
telephone calls or mail come in. Be sure this person is
trained in the procedure as it requires close attention to
detail. It's too easy to "Iose" important customer
information. Only when this information system is in place
is it possible to calculate the cost per visitor inquiry
and booking, conversion rates, and level of expenditures
during a visit.
Cost per Inquiry
Cost per inquiry (CPl) provides a basic measure of the
initial impact of advertising. How many people request
information or otherwise respond to the ad, and how
effective is this when cost factors are introduced?
Private businesses as well as community organizations can
use this decision tool.
Three pieces of information are needed to make cost per
inquiry calculations: 1 ) total cost of production for the
specific ad; 2) cost of inserting the ad; and 3) total
number of inquiries generated by the ad. The following
formula applies:
Cost per visitor(CPV) = total ad production cost + ad
inseltion cost
total number of visits
Here is a hypothetical example for a resort. Suppose you
bought a small $90 Sunday ad in the travel section of a
metropolitan newspaper. The newspaper staff worked with you
prepare the ad at no extra charge. In the next ten days, you
receive 12 mail and phone inquiries:
Cost per inquiry (CPl) = $0 + $90 =$7.50
12
If there had been 40 responses, the CPI would be $2.25;
with only 6 inquiries, the CPI increases to $15. Make notes
variables beyond your control-weather, holidays,
festivals, newspaper editorials or feature stories-that may
increase or decrease the impact of your advertising.
Knowledge of these outside events will help explain the
results and trends you observe over time.
With this information make a list comparing CPIs for
various publications and stations on specific advertising
dates. There are no industry averages or "good" CPIs. You
need to collect this information over an extended period of
determine the typical range of figures for your
business. Compare CPIs only for advertising your property
or attraction; your neighbor's CPl figures are not
relevant.
Consider each CPI and the advertising expenditure it
represents in light of expected visits and the income that
can be realized. CPI is one of the easiest evaluation
measures to use, but inquiries are, after all, only one
step toward visits. The acid test is whether or not the
inquirer becomes a customer.
Conversion Rates and Cost per Visitor
How many dollars of advertising do you spend to get a
living, breathing guest at your business or attraction?
When potential customers contact you, only a portion
actually follow through and visit. It is possible to track
the eventual outcome of an interest in visiting. Cost per
visitor (CPV) figures are based on following each inquiry
to its conclusion-does a partyvisit or not, and what
advertising influenced that decision? Cost per reservation
(CPR) is a comparable measure used by lodging
establishments.
In-house Evaluation
For lodging facilities and other businesses where customers
a record (name and address), the information needed
to calculate cost comparisons is readily available. If the
number of inquiries is small enough it is possible, but
time consuming, to determine how many of the initial
inquiries actually resulted in visits. If the customer base
large, take a sample as outlined in the next
section.
One way to track bookings is to keep an alphabetical list
of all written and phone inquiries, with a note on the
specific advertising they mention. When customers make
reservations, search the inquiry file to see if you have
heard from them previously. Then at the end of the season
or at some specific interval, calculate cost per
reservation for each type of advertising. Sometimes they
may be booking in response to an ad placed a year or two
ago.
Alternatively, on the registration card ask guests how they
about your business. The drawback is that customers
often respond to multiple sources of advertising, and you
will be unable to tell which ad initially created their
interest in visiting. It is also difficult to obtain
specific information this way. Guests might be able to tell
"from the newspaper" or "the radio ads," but not about
specific editions or stations.
Use of Evaluation Surveys
In-house evaluation is a problem for most tourism
businesses and promotion groups. Most tourism facilities
don't record names and addresses of who visited when. Data
management simply becomes too complex for midsize and
larger businesses which do track visits, unless a personal
computer is used. Local Chambers of Commerce or regional
promotion groups face a similar problem as the initial
inquiry comes through the Chamber office, but the actual
reservations take place at private businesses in
The only way for these organizations to get an estimate of
inquiries that "convert" to actual visits is to conduct a
visitor/guest survey. This could be simply a post card or
single sheet questionnaire. Take a sample from the entire
list of inquiries to an ad. Individuals selected randomly
receive a mail or phone survey that asks whether or not
they visited. Other questions commonly included are an
evaluation of the ad and how it was used, and information
on trip characteristics, if applicable. The Minnesota
Office of Tourism uses this method seasonally to learn
which advertising is most effective.
Work with professionals who are knowledgeable about survey
research to assure a sample that is representative of all
inquirers: industry trade groups, the Tourism Center, Small
Business Development Centers, and private consultants. They
help you with sample design, sample size, and writing
survey questions. For example, a proportional sample may be
necessary: this means that if Chicagoans account for 30
percent of inquiries, 30 percent of those sampled should be
residents. The questionnaire return rate is also
important; low rates can bias the results because visitors
are more likely to respond to a questionnaire than people
who didn't visit.
Calculating Conversion Rates and Cost per Visitor
Once you know the number of visits and the source of the
initial inquiry, figure the "conversion rate" for each
advertising component. What percent of people who inquire
from a specific ad actually visit your establishment or
area? Conversion rate is expressed as a percentage:
total number of visits/reservations
Conversation rate = generated by ad x100
total number of inquires generated by ad
Using previous figures, suppose 5 of the 12 inquires
generated by the newspaper ads resulted in a visit:
Conversion rate = 5 x lOO = 41.7
12
Approximately 42 percent of inquiries are "converted" to
actual visits.
Where it is important to count individual visitors-at
attractions or in communities-calculate the cost per
visitor by dividing the ad production costs by the actual
number of visits:
Cost per visitior (CPV) =
total ad production cost + ad insert cost
total number of visits
Where it is important to fill overnight lodging
establishments -resorts, hotels, campgrounds-use the
similar cost per reservation formula:
Cost per =
total ad production cost + ad insertion cost reservation
(CPR) total number of reservations
Continuing the resort example:
Cost per reservation (CPR)= $0 + $90 = $18
5
It costs this resort $18 in advertising to attract each
travel party. Cost per reservation (or cost per visitor)
will always be higher than cost per inquiry.
A high conversion rate means a lower cost per visitor and
vice versa. In other words, if 40 percent of those who
inquire actually visit, your costs to get each travel party
are lower than if only 30 percent of inquirers visit. If con
rates are similar among advertisements, cost
per visitor gives you another way to compare different
media.
It is entirely possible for an ad to give you a low cost
per inquiry, but also a very poor conversion rate. This
means the ad generates a lot of initial interest, but few
visits or reservations result. Cost per visitor will be
high. The reverse can also hold true where cost per inquiry
expensive, but most of those parties actually book
accommodations or visit. Cost per inquiry, the conversion
rate and cost per visitor together, give you an idea of
advertising effectiveness and efficiency.
Return on Advertising Investment
You will also want to know your overall dollar return for
each advertising dollar spent. While visiting your facility
your area, how much does the travel paI spend for
lodging, food, rentals, bait and other services? Link these
to the initial source of the inquiry:
total expenditures by
Return on Investmetn (ROI) = visitors generated by the ad
total ad production cost +
ad insertion cost
To illustrate ROI calculations using the same Sunday travel
ad, assume that the five travel parties brought in
by the ad spent $1,200, $500, $700, $950 and $450,
respectively:
Return on Investment (ROI)=
$1200 + 500+ 700 + 950 + 450 = 422
$90
This is interpreted to mean a return of over 40 times the
ad investment.
You may find that total expenditures vary depending on the
market segment initially responding to the ad. There may be
spenders" and "budget travelers."
Comparison of these ROI figures across media can help to
further target your advertising dollars. For lodging and
other businesses that use registrations, in-house
expenditures will be available from the guest's final bill.
Communities, attractions and other tourism enterprises need
conduct a visitor survey either on the property or with
a mail-back form.
Some Cautions
The complexity of travel decisions makes a word of caution
necessary on how to interpret evaluation results. Were
customers who visited influenced by the advertising, or
were they going to come anyway? Conversion rates in the
travel industry generally tend to be overestimates because
"gross" conversions are used. "Gross" conversions include
everyone in the analysis; "net" conversions include only
people who indicate that the ad (and information that it
offered) influenced a final decision. Some visitor/guest
surveys have included a question on whether and how the ad
or information was used to determine the "real" advertising
Ideally, you will want comparison figures for each
advertising method you use. Remember that exact costs
repeated exposure to several sources For example, a
potential visitor might see a newspaper ad, pick up a
brochure in a travel information center, see a magazinead
-and then call for information. The inquiry would be
attributed to the maaazine ad alone in your records.
However, the cost-comparison methods outlined are still the
way to get estimates abouth the efficiency of
advertising investments.
These issues do point out the complexity of travel
decisions. Information can be used in more ways than
whether or not to visit: how long to stay, where to visit,
what to do and see, where to stay, and routes to travel.
Over time, visitor surveys conducted by the industry should
more clues as to how travelers make use of
information. Consider these factors as you make tradeoffs
in your advertising program.
Your Evaluation Plan
Evaluation of advertising results is complex. Cost
comparison methods to determine the financial return of
each advertising component are only one type of evaluation.
Evaluation can also measure general product awareness and
consumer attitudes as they affect advertising content and
placement. These findings can give you an edge in
influencing consumer purchase decisions by providing
feedback on how the public responds to your advertising.
Despite these competitive advantages, evaluation is
probably the most overlooked step in marketing. Evaluation
requires review of successes and failures as measured
against marketing goals set for the business or community.
Unfortunately, once the ad runs and the dollars are spent,
it's typical to move instead to other management
activities.
The detail, time commitment, and procedural changes
required for evaluation may mean that you can't put these
methods in place immediately. The strategies discussed
here, however, represent a system you can "grow into" over
time. Start with cost per inquiry calculations. When you
see how those figures become valuable decision tools, move
to conversion rates, cost per visitor, and return on
investment. Don't guess: spend your advertising dollars
where your research shows they have an impact.
Be sure to put an evaluation mechanism in place. But don't
let it limit your creativity. Try some new strategiestake
some risks, along with your proven successes -to keep
current in the marketplace.
Resources
Tourism Center, Minnesota Extension Service,University of
Minnesota, 240 Coffey Hall, 1420 Eckles Avenue, St. Paul,
MN 55108.
-Contact for referral to a staff member who can review your
evaluation plans. Offers educational programs and materials
visitor industry on small business management and
community tourism development. Publications are available
from your local county extension agent.
Community Travel and Tourism Marketing (CD-FO-3272)
Tounsm Advertising: Some Basics (CD-FO-3311)
Tounsm Brochures to Boost Business (CD-FO-3273)
Managing Small Resorts for Profit (contains evaluation
material)
Good Records Help Direct Advertising Programs (resort
industry example of using guest records and coded ads),
Tourist Travel Notes (Volume 20, Fall 1983).
(This page of the brochure contains tables and worksheets -
in order to have this you must order the bulletin.)
Credits
Barbara A. Koth is an assistant extension
specialist,Tourism Development, University of Minnesota.
The author gratefully acknowledges review contributions
from Cheryl Offerman, Colleen 1119, and Pat
Simmons,Minnesota Office of Tourism; GIenn Kreag, Minnesota
SeaGrant Extension Program (Duluth); and Lorry
Simonson,Minnesota Extension Service (Grand Rapids).
Many thanks to Mac and Gerre McGuire, McGuire's Piney Ridge
(Pine River) for permission to reproduce theirphone
inquiry/reservation sheets.
The information given in this publication is for
educational purposes only. Reference to commercial products
trade names is made with the understanding that no
discrimination is intended and no endorsement by the
Minnesota Extension Service is implied.
Issued in furtherance of cooperative extension work in
agriculture and home economics, acts of May 8 and June 30,
1914, in cooperation with the U.S. Department of
Agriculture, Patrick J. Borich, Dean and Director of
Minnesota Extension Service, University of Minnesota, St.
Paul, Minnesota 551 08. The University of Minnesota,
including the Minnesota Extension Service, is committed to
the policy that all persons shall have equal access to its
programs, facilities, and employrnent without regard to
race, religion, color, sex, national origin, handicap, age,
status, or sexual orientation.
Copyright @ 1988 by Minnesota Extension Service, University
Minnesota. All rights reserved. No part of these
materials may be reproduced, transmitted, transcribed,
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Minnesota Extension Service, Distribution, Room 3 Coffey
Hall, 1420 Eckles Ave., University of Minnesota, St. Paul,
MN 55108.
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to commercial products or trade names does not imply
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