Question: (1) Brand managers know that increasing promotional budgets eventually result in diminishing returns. The first one million dollars typically results in a 26% increase in

(1) 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 Ant currently has an awareness level of 79% . While an important product for Andrews, Ant's promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Ant loses one-third of its awareness each year, what will Ant's awareness level be next year?

79%

53%

74%

58%

(2) Bam's product manager continues to perform well in the market. However, a competing product is coming on strong and is looking to take over as the market share leader in the segment. Without sacrificing contribution margin, what can the Bam product manager do in order to improve upon the buying criteria, and thus potentially increase demand?

Lower the selling price since it is the second most important buying criteria

Increase MTBF by 2000

Reposition Bam to make it even smaller and higher performing

Increase the promotion budget to gain greater awareness

(3) Digby's product manager is considering lowering the price of the Dome product by $2.50 and wants to know what the impact will be on the product's contribution margin. Assuming no inventory carry costs, what will Dome's contribution margin be if the price is lowered?

34.00%

31.58%

30.00%

32.30%

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