Mountain Goat Cyclery is an independent bicycle retailer in Colorado specializing in mountain bikes. It offers a full line of mountain bikes for men, women, and children as well as accessories and bike repair services. Like many local retailers, it advertises in local media such as newspapers, radio, magazines, and the local news. The owner is considering spending $500 to advertise a summer sales promotion premium offer. For every Diamondback Lux bicycle purchased, the retailer is offering a free Fox Flux mountain bike helmet. It sells the bike for $500, and the retail value of the helmet is $100.

1.If Mountain Goat’s markup percentage on selling prices is 35 percent, what margin will the retailer realize for each bike purchased during the premium offer?

How many additional bikes would Mountain Goat need to sell to break even on this premium offer? Refer to Break-Even and Margin Analysis in Appendix 3:

Marketing by the Numbers to learn how to perform this analysis.

2.Mountain Goat ran the promotion and sold 15 bikes during the promotional period. Assuming the $500 spent on advertising is the only marketing cost associated with this promotion, calculate the net marketing contribution of the promotion. Was the promotion successful? Refer to Net Marketing Contribution in Appendix 3: Marketing by the Numbers to learn how to do this analysis.