Marketing How is awareness created for new products?

Let's suppose we are launching a new product called "Awsum." New products are considered newsworthy events. The buzz creates 25% awareness at no cost. The 25% is added to any additional awareness you create with your promotion budget.

If you do not promote Awsum this year or next, your awareness would fall to two thirds of 25% or roughly 17%.

To counteract this decay, in the years following Awsum’s release, you spend an annual promotion budget. The promotion budget is subject to diminishing returns. It buys advertising, which in turn creates awareness. Each additional dollar you spend has less impact than the previous dollar. (Think of it this way. If every customer heard your message to buy Awsum 99 times, chances are the 100th time would not make much difference.) In the simulation, $2 million will purchase 44% additional awareness. The next $1 million will buy only 6% more additional awareness; you are pushing into diminishing returns.