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Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year,...

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Accounting

Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold237,000drinks at an average price of$3.30per serving. Her average variable cost per serving was$1.36. Currently, she has been using local TV and newspapers to generate interest and awareness at a cost of$133,000per year. She recently contacted Brushfire Social Media and they estimated they could reach the same number of people in her community with a social media budget athalf the cost, though it would require an additional one-time investment of$13,000in their website and social platforms.

As an additional option, Brushfire suggested a separate promotional campaign that would offer a$1discount to any person who likes their social media page. Brushfire estimates that Cool Beans would sell an additional9,400cups with this discount and this new campaign would cost$2,500.

If it turned out that 30% of the coupon redemptions were used by people who would have purchased coffee at the usual price, what would be the Marketing ROI under these conditions?

CALCULATED VARIABLES:

Campaign lift =$8,836

pmargin =$0.94

MROI =4.115(411.5%)

savings =$53,500

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