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Economic Evaluation of Milk Advertising¹

Department of Agricultural Economics, Michigan State University, East Lansing 48824

ABSTRACT

Increasing investments in advertising and promotion programs for fluid milk are being made each year by United States dairy farmers. Concomitantly, demands are increasing on industry officials to account for the efficacy of these programs. Thus, the need for an evaluation of the economic effectiveness of these promotional programs is accentuated. Alternative evaluative methodologies are reviewed followed by an empirical investigation of the economic effectiveness of milk advertising in New York State. In particular, this study examines the economic effectiveness of generic fluid milk advertising in three New York State markets. The response of fluid milk sales to media advertising expenditures in each market shows a positive effect of advertising on sales. Optimal advertising investments are determined, and prescribed spatial allocations of the media advertising budget are suggested.

¹ Michigan Agricultural Experiment Station Journal Article No. 8877. Funds supporting this research were provided from the New York State Dairy Promotion Order.