Question

Chester's Elite product Cid has an awareness of 72%. Chester's Cid product manager for the Elite segment is determined to have more awareness for Cid than Andrews' Elite product Agape. She knows that the first $1M in promotion generates 22% new awareness, the second million adds 23% more and the third million adds another 5%. She also knows one-third of Cid's existing awareness is lost every year. Assuming that Agape's awareness stays the same next year (77%), out of the promotion budgets below, what is the minimum Chester's Elite product manager should spend in promotion to earn more awareness than Andrews' Agape product?

Answer 1

Answer:

Minimum of 2M USD is required to be invested.    

Explanation:

Chester's Elite product Cid Awareness = 72%

First 1M USD generates = 22% awareness

Second 2M USD generates = 23% awareness

Third 3M USD generates = 5%

1/3 of Cid's existing awareness is lost every year

if Cid Awareness = 72% this year .

Next Year it will be = 72-24 = 48%

Year after next year = 48-16 = 32% .

So,

we know that Agape's Awareness remains same next year = 77% .        

So, Chester's Elite Product Manager should spend 2M USD in promotion in order to get ahead from Andrew's Agape Product.

Because by spending 2M USD Cid Awareness will become = 117% = 72 + 22+ 23.

So, after a year if it lost 1/3 then = 1/3 of 117 = 39

So, final awareness of Cid will be = 117-39 = 78%

And Andrew's Awareness will be = 77%

Hence, minimum of 2M USD is required to be invested.