Q1. Calico currently operates in a market that has been estimated to have about 5 mill. customers and it is estimate that it has a market share of 10%. The average customer purchase is of $120 per year. The gross margin of Calistro is of 60% and the companys current budget allocates $12 mil. for marketing and sales expenses. The marketing team debates two options:

1. to allocate two extra millions to the sales team in order to increase the sales per customer by 10% (gross margin would remain the same %).
2. to create a marketing campaign to show the benefits of the Calico products compared to competitors in order to increase the market share to 12%. The estimate is that the campaign would cost about $3 mil. extra

As Calicos CMO, which initiative would you support and why? For full and partial credit show your work clearly!

Q2. Calculate the CRI and the market leakage for a cold sore over the counter treatment. Given the statistics presented below, how would you modify the campaign or the reaching the market (marketing) strategy in order to improve the CRI?

Exposed to the campaign at least once	30%
Aware of the product	35%
Comprehend the ad	90%
Positive attitude towards the product	50%
Intend to buy	60%
Buy the product	90%