Promotion

Each product’s Promo Budget determines its level of awareness. A product’s awareness percentage reflects the number of customers who know about the product. 50% awareness indicates half of the potential customers know it exists. From one year to the next, a third of those who knew about a product forget about it.

Last Year’s Awareness - (33% X Last Year’s Awareness) = Starting Awareness

If a product ended last year with an awareness of 50%, this year it will start with an awareness of approximately 33%. This year’s promotion budget would build from a starting awareness of 33%.

Starting Awareness + Additional Awareness From Figure 6.2 = New Awareness

These numbers change when the Advanced Marketing Module is active. 

Figure 6.2 Increases in Promotion Budget have diminishing returns. The first $1,500,000 buys 36% awareness; Spending another $1,500,000 (for a total of $3,000,000) buys approximately 50%. The second $1,500,000 buys only 14% more awareness.

Figure 6.2 indicates a $1,500,000 promotion budget would add 36% to the starting
awareness, for a total awareness of 69% (33% + 36% = 69%).

Figure 6.2 indicates a $3,000,000 budget would add 50% to the starting awareness, only 14% more than the $1,500,000 expenditure (33% + 50% = 83%). This is because further expenditures tend to reach customers who already know about the product. Once your product achieves 100% awareness, you can scale back the product’s promotion budget to around $1,400,000. This will maintain 100% awareness year after year.

When new products are invented they are considered newsworthy events. Awareness is created quickly with a public relations campaign. You will be charged automatically a $250,000 fee for marketing rollout and public relations the year the product is released. This fee earns a new product a starting awareness of 50%. Due to diminishing returns, a new product will receive half the additional awareness established products receive for the same amount of Promo Budget. All new products get 50% starting awareness for $250,000, therefore any additional awareness can still be viewed as a relative bargain.

Tip: The $250,000 fee will not be reflected in the Marketing spreadsheet in Capstone.xls. The fee will appear in the next Courier and annual reports.