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 Adam currently has an awareness level of 77%. While an important product for Andrews, Adam's promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Adam loses one-third of its awareness each year, what will Adam's awareness level be next year?

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Business

Oliver Browning

22 June, 21:02

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 Adam currently has an awareness level of 77%. While an important product for Andrews, Adam's promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Adam loses one-third of its awareness each year, what will Adam's awareness level be next year?

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Phoenix Fisher · Answer 1

Awareness level is currently 77%, or. 77.

Awareness decreases by 33% per year, so without any additional promotion spending, awareness next year would be. 77 *.66 (2/3 of 77%)

The 1 million dollar spending will increase awares by 26%, so the effect on awareness will be 0.77 * 1.26

To calculate awareness next year:

77% times (1.26 -.33)

=.77 * 0.93

=.716, or 71.6%