Question

Brand managers know that increasing promotional budgets eventually result in diminishing returns. The first one million dollars typically results in a 26% increase in awareness, while the second million results in adding another 18% and the third million in a 5% increase. Andrews’s product Alan currently has an awareness level of 80%. While an important product for Andrews, Alan’s promotion budget will be reduced to one million dollars for the upcoming year. Assuming that Axe loses one-third of its awareness each year, what will Axe's awareness level be next year?

a. 58%
b. 53%
c. 74%
d. 79%

Answer 1

Axe's awareness level be next year will be 58%. The right answer is a

Step-by-step explanation:

In order to calculate Axe's awareness level for next year, first we need to calculate the Opening awareness level as follows:

Opening awareness level=Closing level−Decrease in awareness per year

=80%−(1/3 ×80%)

=80%−26.4%

=53.6%

​

Therefore, in order to calculate Axe's awareness level for next year we would have to use the following formula:

Expected Awareness level=Opening awareness level+Increase in level

=53.6%+5%

=58%

​