Brand managers know that increasing promotional budgets eventually result in dim
ID: 450469 • Letter: B
Question
Brand managers know that increasing promotional budgets eventually result in diminishing returns. The first one million dollars typically results in a 26% increase in awareness, while the second million results in adding another 18% and the third million in a 5% increase. Andrews’s product Agape currently has an awareness level of 78% . While an important product for Andrews, Agape’s promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Agape loses one-third of its awareness each year, what will Agape’s awareness level be next year? Select: 1 78% 73% 57% 52%
Brand managers know that increasing promotional budgets eventually result in diminishing returns. The first one million dollars typically results in a 26% increase in awareness, while the second million results in adding another 18% and the third million in a 5% increase. Andrews’s product Agape currently has an awareness level of 78% . While an important product for Andrews, Agape’s promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Agape loses one-third of its awareness each year, what will Agape’s awareness level be next year? Select: 1 78% 73% 57% 52%
Explanation / Answer
Agape loses one-third of its awareness each year.
Current awareness level = 78%
Awareness loss upto next year = 78% * 1/3 = 26%
Next year awareness level = 78% - 26% = 52%
However, Agape has a promotional budget of 1 million, which can gain 26% awareness . when the budget is used, the awareness will again soar to 52% + 26% = 78%