Question

English Motors, Ltd. (EML), developed a new all-wheel-drive sports utility vehicle. As part of
the marketing campaign, EML produced a video tape 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 makes a purchase. Marketing research studies indicate that
the sales rate is 12% for the current customer market and 20% for the new customer market.
The cost for each promotion, excluding the test drive costs, is $4 for each promotion sent to
the current customer market and $6 for each promotion sent to the new customer market.
Management also specified that a minimum of 30,000 current customers should test drive the
new model and a minimum of 10,000 new customers should test drive the new model. In
addition, the numbers of current customers who test drive the new vehicle must be at least
twice the number of new customers who test drive the new vehicle. If the marketing budget,
excluding test drive costs, is $1.2 million, how many promotions should be sent to each group
of customers in order to maximize total sales? ​

Answer 1

Explanation:

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