Shawna is the marketing manager for Yummy Marinades and Dips. The company wants to should introduce a new cooking sauce product line with the brand Con-Cook-Tions. Shawna is deciding if she would initially do a test market in selected cities on the East Coast or do a big national product launch. The cost of doing the test market is $150,000. If Shawna does the test market, she has to wait for the results of the test market before she decides to do a nationwide launch of Con-Cook-Tions. The probability of a positive response from the test market result is estimated to be 0.6. Alternatively, Shawna could also decide to bypass the test market and go ahead with the national launch. If Con-Cook-Tions is launched nationally and becomes a huge success, the company estimates that it will realize an annual profit of $1.6 million. If the launch fails and the market reacts negatively to the sauces, Yummy will incur a loss of $700,000. Shawna company believes the probability of success for Con-Cook-Tions is 0.50, if the brand is introduced without the test market. If Yummy goes for the test market and the response is enthusiastically positive, then the probability of successfully introducing Con-Cook-Tions nationally increases to 0.8. If the test market response is negative, and Yummy introduces the sauces anyway, the probability of success drops to 0.30. The EVPI (Expected Value of Perfect Information) for this problem
Shawna is the marketing manager for Yummy Marinades and Dips. The company wants to should introduce a new cooking sauce product line with the brand Con-Cook-Tions. Shawna is deciding if she would initially do a test market in selected cities on the East Coast or do a big national product launch. The cost of doing the test market is $150,000. If Shawna does the test market, she has to wait for the results of the test market before she decides to do a nationwide launch of Con-Cook-Tions. The probability of a positive response from the test market result is estimated to be 0.6. Alternatively, Shawna could also decide to bypass the test market and go ahead with the national launch. If Con-Cook-Tions is launched nationally and becomes a huge success, the company estimates that it will realize an annual profit of $1.6 million. If the launch fails and the market reacts negatively to the sauces, Yummy will incur a loss of $700,000. Shawna company believes the probability of success for Con-Cook-Tions is 0.50, if the brand is introduced without the test market. If Yummy goes for the test market and the response is enthusiastically positive, then the probability of successfully introducing Con-Cook-Tions nationally increases to 0.8. If the test market response is negative, and Yummy introduces the sauces anyway, the probability of success drops to 0.30.
The EVPI (Expected Value of Perfect Information) for this problem is $
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