Promotional Spending

Dominique opened a cupcake bakery, Sweet Bites, in her hometown two years ago. Last year, she sold over $6,200$ cupcakes per month and made a $$90,000$ profit which was a $33$ percent increase over her year $1$ performance. Her goal is to continue to grow her business, and therefore she is considering her promotional options. Until this point, Dominique has relied on word of mouth and a limited social media presence to promote her cupcake shop.

Dominique is considering sales promotion, advertising, and public relations as her primary promotional elements. For sales promotion, she decided on a $$0\mathrm{.}50-$off coupon; for advertising, she decided on radio ads; and for public relations, she decided on visiting local talk shows to guest$-$host their baking segments. She knows that each promotional element has its own expense and effectiveness, but she is struggling to decide whether to use one element or a combination of elements to grow her business. Dominique recalled that using a combination of promotional elements through integrated marketing communications sometimes increases an element's effectiveness and therefore creates a spreadsheet to help her make the decision.

The goal of this activity is to evaluate a promotional decision using key integrated marketing communication and profitability metrics.

Recall that the Promotion$-$to$-$sales ratio $=$ Total promotional expenditures$/$Total sales.

Refer to the formula above and the spreadsheet provided to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns H to K$.$ Start by entering the initial values into columns C to F$.$ Then review the questions below and adjust the values in columns C to F to determine the correct answers.