Dinh's Donuts (A): Optimizing Advertising Reach Custom Case Solution & Analysis

1. Evidence Brief — Business Case Data Researcher

Financial Metrics:

Total advertising budget: $12,000 per month (Exhibit 1).
Customer Acquisition Cost (CAC): $4.50 (current average).
Average order value: $14.20 (Paragraph 4).
Net margin per order: 22% (Exhibit 2).

Operational Facts:

Store locations: 3 (City Center, North District, West Suburbs).
Production capacity: 4,000 units/day (Exhibit 3).
Current utilization: 65% on weekdays; 85% on weekends.
Advertising channels: Instagram (current focus), Local Radio (tested), Facebook (untapped).

Stakeholder Positions:

Dinh (Owner): Wants to maximize foot traffic without eroding margins. Skeptical of digital spend efficiency.
Marketing Lead: Argues for shifting 30% of budget to Facebook to reach the 35-50 demographic.

Information Gaps:

Attribution data for radio spend is anecdotal; no tracking mechanism in place.
Customer lifetime value (CLV) is not calculated; current analysis relies purely on single-transaction margins.

2. Strategic Analysis — Market Strategy Consultant

Core Strategic Question

How should Dinh reallocate the $12,000 monthly advertising budget to improve customer acquisition efficiency across distinct demographic segments?

Structural Analysis

Customer Segmentation: The business serves two distinct groups: the morning commuter (speed-sensitive) and the weekend family unit (price/variety-sensitive). Current Instagram spend targets the younger demographic but ignores the higher-spending family segment.

Strategic Options

Option 1: Digital Pivot (Facebook/Instagram Split). Allocate 50% to Facebook to target families and 50% to Instagram for brand awareness. Trade-off: High reliance on digital platforms; risk of ad fatigue.
Option 2: Hyper-Local Radio Focus. Shift 70% of budget to morning radio slots in the North District. Trade-off: High cost-per-impression; difficult to measure conversion.
Option 3: Retention-Led Loyalty Program. Divert $4,000 from acquisition to a digital loyalty app. Trade-off: Slower growth in new customer acquisition; higher long-term retention.

Preliminary Recommendation

Adopt Option 1. It addresses the demographic mismatch of the current strategy and provides measurable conversion data via ad-manager analytics.

3. Implementation Roadmap — Operations Specialist

Critical Path

Install tracking pixels on the point-of-sale system to link digital ad clicks to physical transactions (Week 1-2).
Execute A/B testing on Facebook ad creative targeting the 35-50 age bracket (Week 3-4).
Reallocate 30% of budget from Instagram to Facebook based on initial conversion data (Week 6).

Key Constraints

Data Infrastructure: The current POS system does not integrate with ad platforms, requiring manual entry of coupon codes to track attribution.
Operational Friction: Increased foot traffic from successful ads may cause bottlenecks at the City Center location during morning rushes.

Risk-Adjusted Implementation

Phase the rollout. Start with a $2,000 pilot on Facebook. If conversion exceeds the $4.50 CAC threshold, scale to the full $6,000 allocation. If results lag, revert to the baseline Instagram strategy to avoid capital waste.

4. Executive Review — Senior Partner

BLUF

Dinh is currently guessing at advertising efficacy. The business lacks a closed-loop attribution system, rendering the current $12,000 spend a sunk cost rather than an investment. The strategy must shift from broad reach to conversion-based acquisition. Immediate action: implement a coupon-code tracking mechanism to establish a baseline CAC per channel. Abandon radio spend entirely until a clear return on ad spend (ROAS) can be verified. Prioritize the 35-50 demographic via Facebook, as this segment offers the highest average order value. Execution must focus on tracking; without data, any spend increase is gambling.

Dangerous Assumption

The assumption that digital ad spend will translate directly to foot traffic without a clear incentive (e.g., a specific offer) is flawed. The conversion path is currently broken.

Unaddressed Risks

Cannibalization: New customers acquired via digital offers may simply be existing customers using the discount, lowering net margins.
Operational Capacity: If marketing succeeds, the City Center location will fail to meet demand, leading to negative reviews and churn.

Unconsidered Alternative

Focus on B2B catering accounts. Targeting local offices for morning meetings provides recurring, high-volume revenue that is less sensitive to individual ad spend than retail walk-ins.

Verdict: APPROVED FOR LEADERSHIP REVIEW.