Case 7

Atlas Publishers sells magazine subscriptions. Its managers are considering a large promotional campaign in which it will award prizes of P10 million. Other costs associated with campaign follow:

Television time = 4,400,000

Fee to broadcasters TV = 700,000

Mailing = 5,300,000

Total = 10,400,000

Atlas plans to mail 20 million packages containing entry blanks and forms for subscribing to magazines. Atlas receives 25% of total subscription revenue. Experience indicates that about 15% of those receiving a package take out one or more subscriptions. The average subscription revenue from a respondent is P35. (20 pts)

Required:

1) What profit will Atlas earn if the campaign meets all expectations?

2) What is the break-even point for the campaign expressed as a response rate, assuming that each respondent orders P35 in magazines subscriptions? Present analysis.