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22 August, 13:12

Chester's Elite product Cid has an awareness of 72%. Chester's Cid product manager for the Elite segment is determined to have more awareness for Cid than Andrews' Elite product Agape. She knows that the first $1M in promotion generates 22% new awareness, the second million adds 23% more and the third million adds another 5%. She also knows one-third of Cid's existing awareness is lost every year. Assuming that Agape's awareness stays the same next year (77%), out of the promotion budgets below, what is the minimum Chester's Elite product manager should spend in promotion to earn more awareness than Andrews' Agape product?

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  1. 22 August, 13:14
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    Minimum of 2M USD is required to be invested.

    Explanation:

    Chester's Elite product Cid Awareness = 72%

    First 1M USD generates = 22% awareness

    Second 2M USD generates = 23% awareness

    Third 3M USD generates = 5%

    1/3 of Cid's existing awareness is lost every year

    if Cid Awareness = 72% this year.

    Next Year it will be = 72-24 = 48%

    Year after next year = 48-16 = 32%.

    So,

    we know that Agape's Awareness remains same next year = 77%.

    So, Chester's Elite Product Manager should spend 2M USD in promotion in order to get ahead from Andrew's Agape Product.

    Because by spending 2M USD Cid Awareness will become = 117% = 72 + 22 + 23.

    So, after a year if it lost 1/3 then = 1/3 of 117 = 39

    So, final awareness of Cid will be = 117-39 = 78%

    And Andrew's Awareness will be = 77%

    Hence, minimum of 2M USD is required to be invested.
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