If the marketing budget, excluding test drive costs, is $1.2 million, how many promotions should be sent to each group of customers to maximize total sales?
English Motors, Ltd. (EML) developed a new all-wheel-drive sports utility vehicle. As part of the marketing campaign, EML produced a videotape sales presentation to send to both owners of current EML four-wheel-drive vehicles as well as to owners of four-wheel-drive sports utility vehicles offered by competitors; EML refers to these two target markets as the current customer market and the new customer market. Individuals who receive the new promotion video will also receive a coupon for a test drive of the new EML model for one weekend. A key factor in the success of the new promotion is the response rate, the percentage of individuals who receive the new promotion and test drive the new model. EML estimates that the response rate for the current customer market is 25%, and the response rate for the new customer market is 20%. For the customers who test drive the new model, the sales rate is the percentage of individuals that make a purchase.
If the marketing budget, excluding test drive costs, is $1.2 million, how many promotions should be sent to each group of customers to maximize total sales?
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