Carlos Villegas

Carlos Villegas graduated in 2005 at the top of his class from the USIL School of
Marketing. In this case, Carlos is being interviewed for the position of Junior Executive at
one of Peru’s most important marketing consulting companies: Consultoria Estrategica.
Introductory salary is $1200.00 a month plus bonuses, and the job itself is a great
opportunity for Carlos to showcase his professional development.

During the first part of the interview, the interviewer asks Carlos about his strengths and
weaknesses, and he provides very precise answers. In the second part, the interviewer
decides to test Carlos’ analytical skills with a real-world case. Here is what happened:

“The Peruvian government is assessing a proposal it has received from a consortium of

U.S. television channels for sponsoring a video that will promote Peru as a tourist
destination in the United States. The video’s format is raising some questions as to the
possible effect it will have on inbound tourism because it devotes several minutes on the
life of the President of Peru and his family. On one hand, some think it would be more
political instead of tourism-related and therefore would hardly influence the number of
tourists visiting the country. These analysts also believe that the government sees this
video as a way of promoting itself rather than Peru.

On the other hand, the government has pledged to invest USD 350,000 to produce the
video, while the balance would be spread out amongst the consortium members;
furthermore, anticipated U.S. viewership is 150 million.

The video would be released at the beginning of 2006. As stated above, there is much
debate about its benefits, yet studies from other countries that have broadcast similar
videos show that the number of inbound U.S. tourists has grown from 1% - 10%.

Your assignment is to propose a method for measuring whether the video will truly
benefit inbound tourism promotion. You will have to support your answer with data that is
based upon your knowledge of tourism.”

After listening attentively and writing down some notes, Carlos asks the interview:

“Do you have any idea what the number of inbound U.S. tourists might be as a result of
this video?”

The interviewer responds:

“Carlos, that question is almost impossible to answer… actually, I need you to tell me
how to calculate that.”

Carlos asks:

“Then I would like to change my question. For countries that were the focus of similar
videos, could you tell me the number of inbound U.S. tourists before and after the video
was produced and the net percentage of increase, I mean, what we can attribute to the
video?”

The interviewer responds:

“Here is all the information I have.”

He takes out a chart and hands it to Carlos.

Country Inbound U.S. tourists in % of increase 2005/2004

2004 (before the video)
Jamaica 300,000 1%
Guatemala 200,000 5%
Mexico 5,000,000 5%
Costa Rica 400,000 10%
France 2,000,000 2%
Japan 1,500,000 2%
Nepal 500,000 5%
Aruba 350,000 2%
Ecuador 150,000 5%

“Also, these increases in inbound U.S. tourists may be attributed to the video since the
countries’ tourism promotion budget for the U.S. did not change from 2001 – 2003, the
years prior to the video.”

Later, the interviewer tells Carlos:

“I don’t have any more information, and I need your answer right now!”

Would the video benefit Peru?

Your task is to help Carlos answer that question.

Additional information:

✓ # of U.S. inbound tourists to Peru 2005: 220,000

✓ Average amount spent/American tourist: USD 1200.00
✓ Alternative campaigns:
o Response rate to the T.V. ad campaign is 5% with a cost/contact of USD
7.00.
o Response rate for an Internet ad campaign is 3%, with a cost/contact of
USD 2.50
✓ Assume there are not fixed costs.

Questions:

a) Considering the best scenario, would the video benefit Peru?

b) Considering the worst scenario, would the video benefit Peru?

c) Would you sponsor the video?