Kinsley and Sons has sales of 185 million they had earnings of 13 million. The w
ID: 2356740 • Letter: K
Question
Kinsley and Sons has sales of 185 million they had earnings of 13 million. The web sales department is considering a major advertising and marketing campaign to drive additional sales to the web site. The Web sales department expects the campaign to generatew 56 million of additional web site sales and profits of 4 million (before including costs of campaign). The annual cost of of advertising and marketing campaign is 2.8 million. Spillover effect in catalog sales of 600,000. The manager of catalog sales predicts half of the additional Web sales and profits will come at the expense of catalog sales. This is, about 28 million of additional web sales and 2 million of profits.a. Should Kinsley and sons undertake the additional advertising and marketing campaign for its web site. Support your conclusion with data and/or figures.
Explanation / Answer
Kinsley and Sons has sales of 185 million they had earnings of 13 million.
The web sales department is considering a major advertising and marketing campaign to drive additional sales to the web site. The Web sales department expects the campaign to generatew 56 million of additional web site sales and profits of 4 million (before including costs of campaign). The annual cost of of advertising and marketing campaign is 2.8 million. Spillover effect in catalog sales of 600,000. The manager of catalog sales predicts half of the additional Web sales and profits will come at the expense of catalog sales. This is, about 28 million of additional web sales and 2 million of profits.
a. Should Kinsley and sons undertake the additional advertising and marketing campaign for its web site. Support your conclusion with data and/or figures. YES! As we can see in the calculations below, the costs and spillover effects of the advertising campaign are much lower than their expected boost to profits. Thus, the advertising campaign will increase profits and will benefit the company's financial standing.
This campaign is an outstanding idea that will help boost sales and revenues, as illustrated in the "before/after" table below:
BEFORE:
185 mil in sales
$13 mil in profits
AFTER:
185 + 56 - 600,000 = 241,400,000 sales
$13 + $4 - $2.8 = $14.2 million in profits
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