Table 1: Returns to Promotional Channels
Investment	Channel A	Channel B
	Exposure	Exposure
1,000,000	40,000 = 10,000 converted	37500 = 28,125 converted
2,000,000	90,000 = 22,500 converted	75000 = 56,250 converted
3,000,000	130,000 = 32,500 converted	120000 = 90,000 converted
4,000,000	160,000 = 40,000 converted	156000 = 117,000 converted
5,000,000	180,000 = 45,000 converted	171600 = 128,700 converted
6,000,000	190,000 =47,500 converted	175000 = 131,250 converted
	25% conversion rate	75% conversion rate
1)	Budget = $6,000,000 Historical Allocation: Channel A = 2/3 of budget, Channel B = 1/3 of budget
	Channel A = $6,000,000 * (2/3) = $4,000,000
	Channel B = $6,000,000 * (1/3) = $2,000,000 Determine the optimal allocation that is in the best interest of the CFO. (5 marks) Determine the optimal allocation for the CMO? (5 marks) Calculate the Advertising Elasticity of Demand for each channel at the optimal allocation you found in part 3. (10 marks). If your budget was increased by $2,000,000, how would you allocate these dollars? (5 marks) Assume the product sells for $100 and the contribution margin for each product sold is 50%. At the new allocation (the one determined in question e), is the firm overinvesting or underinvesting in marketing? Explain. (10 marks) If we assume that the contribution for each customer is $50, what is the ROI of the total allocation and the ROI of each channel?