Marketing Setup: It's time to plan how to spend the next year's Marketing budget. Currently, we use a mix of web ads (a combination of banner ads and...
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Question

MarketingSetup:

It's time to plan how to spend the next year's Marketing budget. Currently, we use a mix of web ads (a combination of banner ads and social media), print ads in trade publications, and booths at trade shows to gain new customers. We plan to spend $250,000 next year on these marketing venues, and we'd like you to put together a recommendation on how to distribute these funds in order to maximize our total return. We have historically seen a 100% return from web ads, 150% return from print ads, and 75% return from trade booths. Trade show booths are expensive and have our lowest returns, but they help us build and maintain relationships that can make the efforts of our sales team easier in the long run. The minimum we would usually invest here is 25% of our budget. Print ads are surprisingly lucrative, but there are only so many publications in which our ads would be useful. We like to keep this budget tied to our web advertising budget; we don't want to spend more then two-thirds of our web budget on print ads. Please provide us your recommendations of how much to spend on each marketing venue.

Follow-up Questions:

After you've built your model, we would like some input from you. Our Sales team has indicated that we might be underestimating the ROI for trade shows given the number of times they've made deals based on continuous conversations over the course of several trade shows, which is admittedly a complicating factor. Based on their figuring, we could be getting as much as 100% return on trade shows. They argue that we should be spending more here. What are your thoughts on this?

Finally, we've been speaking with a consulting firm about our web ads. We think that we should be getting a better return, and they agree. They think that they can increase our web ROI to 125%. We were wondering if this would change how we allocate our budget. Also, do you think that their price of $25,000 a year is worth it?


Marketing Venue

ROI

Web

100%

Print

150%

Booths

75%



 

Operations

Setup:

We currently have six plants that we use to produce our product, KL3 Product 3000. Below is a chart of how much it costs to use each factory and how many units each plant can produce each month. We need to produce at least 1,000,000 units a month to keep a smooth experience for our suppliers, and we want to keep our costs low. What would you recommend as the best plan for production?

Also, we want to look at the results of a test we'd run. For plants 3 and 4, we tried to find either a high fixed cost - low unit cost model or a low fixed cost - high unit cost model. Now that we've settled all the arrangements, we finally know what the exact costs are going to be. We only want to continue with one of these plants, and we would like your guidance on which one we should move forward with as part of your recommendation.

 

Plants

 

1

2

3

4

5

6

Fixed Costs

 $ 225,000

 $ 300,000

 $ 455,750

 $ 100,000

 $ 275,000

 $ 325,000

Per Unit Cost

 $ 25

 $ 20

 $ 10

 $ 50

 $ 20

 $ 15

Potential Output

225,000

245,000

400,000

400,000

230,000

300,000

Answered by Expert Tutors

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