Question

1. You are the Chief Marketing Officer of a company that sells two product lines (A and B) and you are reviewing the respective marketing teams' proposals to drive growth on these product lines. Team A operates in a market with a total value of $1 billion and has already established 10% market share; this team believes it can gain another 1% market share by investing $2,500,000 in an integrated marketing campaign over the next year. Team B, on the other hand, has become expert at running highly effective sales promotions; this team believes it can generate $5 for every $1 invested in sales promotion over the next year. Team B has requested $2,000,000 in support of its plans.

A. How much revenue will each team generate if its proposal were fully funded? Show your calculations.

B. What is the marketing return on investment (MROI) associated with each proposal? Show your calculations.

C. Both teams are adamant that theirs are "all or nothing" proposals, so splitting the marketing budget across them may lead to suboptimal results (you know better, though). If you humor them on the "all or nothing" argument and cast all other considerations aside, which team's proposal should you fund? Briefly explain your answer.

Answer 1

Team A
Team A Total Market	$          1,000,000,000
Additional Sales Revenue @1% from Marketing investment =	$               10,000,000	Ans A
Marketing Investment Required	$                 2,500,000
MROI =(Sales Growth-Marketing Investment)/Marketing Investment
MROI for Team A =	300%	Ans B
Team B
Marketing Investment Requested	$                 2,000,000
Additional Sales Revenue @5 times of Investment=	$               10,000,000	Ans A
MROI =(Sales Growth-Marketing Investment)/Marketing Investment
MROI for Team B =	400%	Ans B
Ans C
If the consideration is all or nothing, the proposal of
Team B should be funded as it has higher MROI.