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This report involves one, analysis of the advertisement types used by Qinsta and the associated benefit to the business. Where, relative percentage change in revenue from each ad type are presented in chart and table form. Second, the cost of proposed change (relocation and renovation) to the company. The company is faced with a decision to make and the analysis show that a loan from Banque Credite is the most affordable given the two options. The last part involves synthesis of available information to predict possible gains from the business activities of the establishment. The main form of revenue being through influencer post. The company will need to sell a given minimum number of posts in order to cover all the cost involved. This list section describes possible scenarios for Qinsta to be profitable in the industry.
Qinsta Revenue Stream
Sponsored ads experienced an increasing trend in the first two quarters (Q1 = 25.00% and Q2 = 52.00%). However, in the last two quarters the cost of setting up the ad exceeded the revenue (Q3 = -42.11% and Q4 = -31.82%). Similarly, Carousel ad brought positive revenue in all the quarters but with decreasing percentages (Q1 = 18.00% to Q2 = 33.33% to Q3 = 16.67% and finally Q4 = 7.14%). The use of stories as ad brought positive revenue with peak in second quarter (Q2 = 175.00%). The last two quarters involved the add contributing an increasing return (Q3 = 69.70% to Q4 = 76.79%). Finally, Direct ads in the first two quarters brought positive revenue at a decreasing rate (Q1 = 31.00% to Q2 = 12.90%). Besides, in the last two quarter the expenditure on the ad exceeded the revenue (Q3 = -48.57% to Q4 = -11.11%). In general, sponsored and direct ads have cost exceed the revenue thus, should be avoided by the company. In addition, the company gain more revenue through Carousel and Stories ads. Therefore, the company should come up with a marketing mix that involves Carousel and Stories ads.
Based on the sparklines, sponsored ads experience an irregular trend and its in a declining trend. Carousel is in a declining trend implying continuous use of the method will eventually result in losses to the company. Stories ads experience an irregular pattern but it stabilizes in the last two quarters, an indication that the revenue will increase or remain constant in the next quarters of 2018. Finally, direct adds has been experiencing a declining trend but in the last quarter it starts to better . An indication that the ad type may be beneficial in the late quarters of 2018. The 2018 projected ad revenue is $4.0404 billion. Qinsta should invest more in stories advertisements and consider dropping sponsored ads.
Relocation and Revenue
Based on the approximations of the architect Qinsta will need $120,000 which will be financed through a loan. The company has two options. The first is a Banque Credite loan the company is expected to pay $7,075.92 every three months for a period of 5 years. The loan will cost Qinsta a total of $21,518.33 by the end of the five years. The second option is a loan from Bahd Bank in which the Qinsta will pay $2,300 every month for the next five years. Therefore, Qinsta will have paid $27,600 as the cost of the loan. The company should consider the loan from Banque Credite because it will cost less than the second option and the repayment schedule is organized in quarters a method which suits companies.
The influencer posts are categorized into four. The first charge $300 for every post and this will give customers the benefit of 20 influencers with twenty thousand followers. Second, goes for $600 with the advantage of five times the number of followers (100K) and 14 influencers. This means that the customer will reach a wider potential clients base. Next, cost $1200 with the benefit of accessing 500,000 followers and nine influencers. An indication that customers who purchase the third category of influences will have access to approximately 500,000 potential clients base. The final category involves access to more than 500K viewers and 5 influencers. This top most influencer will cost Qinsta customers $3,000 to post. The company will have to spend $850.3 for setting up the influencer taking into consideration the number of influencers, algorithm marketing and customization of a post.
In order for the resources used by the company in influencer post to equal the gain received from the posts, the company must sell 32 posts every month. The 32 posts will bring the company an additional income of $8,818.3 every month.
In case the company manage to sell 40 posts in a month then the it will receive $2,235.6 as gain from the influencers. However, if Qinsta is to receive a gain of $10,000 then, they need to sell 71 influencer posts. Decreasing the gain from influencers will lower the cost to the customers and as law of demand dictates, more customer will be willing and able to purchase Qinsta influencer ads. The price will reduce from $1,105.39 to $1062.875. Therefore, those who could not purchase these, post due to an extra $45 can now be customers of the company. This will in turn increase the number of influences sold which will consequently increase the amount of gain the company will receive. The company expects to earn $25 to $30 dollars on every $100 used in setting up influencers. This is a good gain for the company and thus the should continue influencer ads.
Conclusions and Recommendation
From the analysis of advertisement types stories and Carousel ads are the most beneficial to Qinsta. On the other hand, sponsored and direct ads will cost the company in 2018 with little or no profit. Besides based on sparkline the direct ads are on the upturn and thus might bring more revenue in the future for the company. Qinsta is planning a renovation which will be financed by a loan either from Banque Credite or Bahd Bank. However, the offer from Banque Credite is more cheap and flexible. In terms of revenue, the company must sell more than 32 posts to remain profitable otherwise the business may become bankrupt.
Qinsta should use more of stories and carousel ads their main method of advertising. Moreover, they should consider dropping sponsored adverts as they are associated with high cost and little or no return. In line with the planned relocation and renovation the company should take a loan from Banque Credite. The finance has a comparatively less interest as opposed to Bahd bank loan with monthly repayments. The main aim of a business is to make profit (Qinsta is not an exclusion). Therefore, if charging high price will reduce sales the company should consider lowering the price.
Appendix 1 – Qinsta Revenue Stream
Table 2: Relative percentage change in revenue in each financial quarter by ad type
c) Sponsored ads
d) Relative Percentage change =
0.11 x 3.64 = Total ad Revenue 2018 – 3.64
0.4004 = Total ad Revenue 2018 – 3.64
Total ad Revenue 2018 = 0.4004 + 3.64
Total ad Revenue 2018 = $4.0404 billion
Appendix 2 -Relocation and Renovation
a) Shown in excel sheet
Appendix 3 – Influencer Advertising
(i) The break-even number of posts per month for Qinsta.
BEP = Total Fixed Cost/ (Price per post – Variable cost per unit)
Fixed costs: Account Manager Salary = $ 3,500
Operational Cost = $3,562
Indemnity Insurance = $906
TFC = 3500 + 3562 + 906 = 7968
Variable cost: Influencer = (300x20 + 600x 14 + 1200 x 9 + 3000 x 5)/ (20 +14 +9 5) = 837.5
Algorithm marketing = 6.98
Customized product = 5.82
TVC = 850.3
Price per post = 130% of TVC
BEP = 7968/ (1105.39-850.3)
= 31.23 ≈ 32 posts.
(ii) The monthly revenue at break-even.
At Breakeven point; Revenue = TFC +TVC
= 7968 + 850.3
Revenue = $8818.3
(c) At 40 posts TC = 41980, TR = 44215.6
Profit = TR – TC
= 44215.6 – 41980
Profit = TR – TC
TR = 1105.39 x Number of post (P)
TC = TFC + TVC x Number of post (P)
= 7968 +850.3p
Profit = 10000
10000 = 1105.39p – (7968 +850.3p)
10000 = 255.09p – 7968
17968 = 255.09p
P = 70.42 ≈ 71 posts
(e) The contribution margin will reduce b 5% however, the company will compensate through the increase in sales.
Price per post = 125% of TVC
= $ 1062.875
BEP = 7968/ (1062.875 - 850.3)
= 37.48 ≈ 38 posts.
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