Imagine that you are a marketing product manager in a consumer products company that markets its products through retailers. You can pick a consumer product category that interests you. Your company is ten years old and has experienced solid growth over the last few years.

Here is the income statement (plan/budget) for the current fiscal year.

Sales (revenue) $250 million

COGS ($162.5 million)

Gross Profit $87.5 million (35% of Sales)

SG&A* ($60 million)

Op Profit $27.5 million

*The marketing expense budget is $20 million.

It is the first quarter of the year and your boss, the marketing manager, has asked you to write a proposal for an additional marketing initiative to generate more growth this year and “momentum” going into the next year. You asked how much you can spend (increase marketing expense), and the answer was no more than $1 million in the current year, and maybe more next year. This is pretty exciting but a bit scary as well. You have been with the company for two years, and are increasingly vocal with the marketing manager about where you think the company has fallen behind. Specifically, you feel it lacks an integrated digital marketing strategy that includes social media platforms, the company website, and artificial intelligence. As you think more about this opportunity, you wonder if the marketing team can handle an additional initiative and if upper management can be persuaded to spend another $1 million on marketing. 

Notes:

All categories are incremental (i.e., additional) and expressed in $ millions. Ex. MI= $1 (MILLION)

Assume the Marketing Investment (MI) carries on in year 2 at the same amount or increases.

Assume 65% COGS.

NMC = GP-MI

ROMI = NMC/MI

Complete:

FILL IN EACH STEP, AND FOR BOTH YEAR 1 AND YEAR 2,

ROMI Proforma

                                                                     Year 1                 Year 2

Sales (revenue)                                           $___                         ___

COGS                                                            $ ___                        ___

Gross Profit (GP)                                         $ ___                        ___

Marketing Investment (MI) _                      $ _                             __

Net Marketing Contribution (NMC)           $ ___                         ___

Return on Marketing Investment (ROMI) % ___                          ___

Answer rating: 100% (QA)

Year 1 Sales revenue 250 million COGS 65 of Sales 065 250 million 1625 million Gross Profit G... View the full answer