Brand managers know that increasing promotional budgets eventually result in dim

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 Alan currently has an awareness level of 80% . While an important product for Andrews, Alan’s promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Alan loses one-third of its awareness each year, what will Alan’s awareness level be next year? Select: 1 58% 79% 74% 53% 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 Alan currently has an awareness level of 80% . While an important product for Andrews, Alan’s promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Alan loses one-third of its awareness each year, what will Alan’s awareness level be next year? Select: 1 58% 79% 74% 53%

Explanation / Answer

Alan's current awareness level = 80%

Loss of awareness by the next year = 80% * 1/3 ~ 27%

Alan's awareness level next year = 80% - 27% = 53%

If Alan utilises the budget of 1 million dollars, then it will result in 26% increase in awareness, so awareness will become 53% + 26% = 79%

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