Question
Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold 237,000 drinks at an average price of
Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold237,000drinks at an average price of$3.30per serving. Her average variable cost per serving was$1.36. Currently, she has been using local TV and newspapers to generate interest and awareness at a cost of$133,000per year. She recently contacted Brushfire Social Media and they estimated they could reach the same number of people in her community with a social media budget athalf the cost, though it would require an additional one-time investment of$13,000in their website and social platforms.
As an additional option, Brushfire suggested a separate promotional campaign that would offer a$1discount to any person who likes their social media page. Brushfire estimates that Cool Beans would sell an additional9,400cups with this discount and this new campaign would cost$2,500.
If it turned out that 30% of the coupon redemptions were used by people who would have purchased coffee at the usual price, what would be the Marketing ROI under these conditions?
CALCULATED VARIABLES:
Campaign lift =$8,836
pmargin =$0.94
MROI =4.115(411.5%)
savings =$53,500
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started