Meat Lovers Company is an international manufacturer of meat products such as liver, kidneys and hooves. Top management has recently become concerned about the erosion of its competitive position and is now considering plans for a winter promotional campaign. The special promotion would cost K100, 000 and management is concerned about whether it should contract for an expenditure of this magnitude, since it has little past experience against which to measure the possible success of these efforts. If consumer reaction is extremely favourable (over a 10 percent increase in market share), the company stands to make an incremental profit of K400, 000; if it is favourable (5 to 10 percent increase in market share), the projected profits are K100, 000, while if it is unfavourable (no appreciable change in market share), the company stands to incur an incremental loss of K100, 000 - the cost of the campaign. The marketing manager's best estimates of the likelihood of these occurrences are, respectively, Extremely favourable consumer reaction probability = 0.3 Favourable consumer reaction probability = 0.4 Unfavourable consumer reaction probability = 0.3 The meat Lovers Company is considering contracting for a marketing research study to assess the potential effectiveness of the planned campaign. The research study would cost K25, 000, and would include laboratory copy tests to measure attention-getting power and field studies to assess consumer attitudes toward the advertisements. On the basis of its past experience, the Embalm Research Company has suggested the following relationship between its assessments of an ad's effectiveness and the ultimate success of the advertisement. BS 360 Assignments 2019 Consumer Reaction Unfavourable Embalm Research Experience Strongly positive Extremely Favourable Favourable 0.7 0.2 0.0 Moderately positive 0.3 0.6 / Slightly positive 0.0 REQUIRED: a. Should the decision on the special promotion be made without the research, or should the proposed research be conducted? Justify your answer. (10 Marks) b. Evaluate the value of the research information to be provided by the Embalm research company. Is it worth the K25, 000 it costs? (15 Marks) Meat Lovers Company is an international manufacturer of meat products such as liver, kidneys and hooves. Top management has recently become concerned about the erosion of its competitive position and is now considering plans for a winter promotional campaign. The special promotion would cost K100, 000 and management is concerned about whether it should contract for an expenditure of this magnitude, since it has little past experience against which to measure the possible success of these efforts. If consumer reaction is extremely favourable (over a 10 percent increase in market share), the company stands to make an incremental profit of K400, 000; if it is favourable (5 to 10 percent increase in market share), the projected profits are K100, 000, while if it is unfavourable (no appreciable change in market share), the company stands to incur an incremental loss of K100, 000 - the cost of the campaign. The marketing manager's best estimates of the likelihood of these occurrences are, respectively, Extremely favourable consumer reaction probability = 0.3 Favourable consumer reaction probability = 0.4 Unfavourable consumer reaction probability = 0.3 The meat Lovers Company is considering contracting for a marketing research study to assess the potential effectiveness of the planned campaign. The research study would cost K25, 000, and would include laboratory copy tests to measure attention-getting power and field studies to assess consumer attitudes toward the advertisements. On the basis of its past experience, the Embalm Research Company has suggested the following relationship between its assessments of an ad's effectiveness and the ultimate success of the advertisement. BS 360 Assignments 2019 Consumer Reaction Unfavourable Embalm Research Experience Strongly positive Extremely Favourable Favourable 0.7 0.2 0.0 Moderately positive 0.3 0.6 / Slightly positive 0.0 REQUIRED: a. Should the decision on the special promotion be made without the research, or should the proposed research be conducted? Justify your answer. (10 Marks) b. Evaluate the value of the research information to be provided by the Embalm research company. Is it worth the K25, 000 it costs? (15 Marks)
