ACMY currently operates in a market that has been estimated to have about 10 mill. customers and
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Question:
ACMY currently operates in a market that has been estimated to have about 10 mill. customers and it is estimate that it has a market share of 8%. The average customer purchase is of $150 per year. The gross margin of ACME is of 50% and the company's current budget allocates $20 mil. for marketing and sales expenses. The marketing team debates two options:
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- To create a marketing campaign to show the benefits of the ACME products compared to competitors in order to increase the market share to 10%. The estimate is that the campaign would cost about $5 mil. extra.
- To allocate six extra millions to the sales team in order to increase the sales per customer by 30% (gross margin would remain the same %).
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As ACME's CMO, which initiative would you support and why?
How to calculate it?
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