Question

Jamie Patterson introduced the first new fruit juice product line extension last year and it has done well. It is called Exotic Blends with Ginseng, and it now has some new competitors. Clearly, it is in the growth phase. She decides to double the advertising and sales promotion budgets. However, Jamie is concerned that her VP of marketing might find some fault with this decision. You know that he won’t have a problem with her decision. Why not?

a. the distribution is better, and your distribution costs will start to fall, freeing up some funds for promotions

b. the market is still growing...and your profits are growing, too

c. the market is still growing ... and your profits are too-and increased advertising and promotion costs will acutally represent a decrease in expenditures as a percentage of sales

d. The market is still growing ... and your profits are still growing too-increased advertising and promotion costs will actually represent a decrease in expenditures as a percentage of sales- and the distribution is better, and your distribution costs will start to fall, freeing up some funds for promotions.

e. increased advertising and promotion costs will acutally represent a decrease in expenditures as a percentage of sales

Answer 1

answer is: c. The market is still growing.... and your profits are too-and increased advertising and promotion costs will actually represent a decrease in expenditures as a percentage of sales

The reason for this is because the product and its market are in a growth phase as has been given in the information above, it can capture more consumers which will increase its profits and increased advertisement to tackle the competitors would become a small amount when compared to sales percentage as the amount will get distributed on the large consumer base. Option d. could have been an answer but no information about the distribution network being efficient or not isn't given and hence option c. will be the correct answer