SHOW CALCULATIONS

Question 3

Using competitive parity approach, calculate the appropriate ad spend for a Company A with 5% market share.

Their gold standard competitor has 30% market share. They spend $10 million/year on advertisements.

• How much should Company A be spending on advertisements per year?
• If Company A wants to increase their share to 8%, how much should they spend on advertisements per year?

Question 4

A company has a 25% profit margin.

Last year, their annual revenues were $20 million.

They are spending $500,000 on advertisements this year.

• What should their annual revenues be this year to justify the ad spend?