The Super Cola Company Must Decide Whether or Not to Introduce

question 37

Essay

The Super Cola Company must decide whether or not to introduce a new diet soft drink. Management feels that if it does introduce the diet soda it will yield a profit of $1 million if sales are around 100 million, a profit of $200,000 if sales are around 50 million, or it will lose $2 million if sales are only around 1 million bottles. If Super Cola does not market the new diet soda, it will suffer a loss of $400,000.
a.
Construct a payoff table for this problem.
b.
Construct a regret table for this problem.
c.
Should Super Cola introduce the soda if the company: (1) is conservative; (2) is optimistic; (3) wants to minimize its maximum disappointment?
d.
An internal marketing research study has found P(100 million in sales) = 1/3; P(50 million in sales) = 1/2; P(1 million in sales) = 1/6. Should Super Cola introduce the new diet soda?
e.
A consulting firm can perform a more thorough study for $275,000. Should management have this study performed?

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Definitions:

Media Mix

The combination of different types of media (digital, print, TV, etc.) used in a marketing strategy to reach the target audience.

Flighting

An advertising scheduling strategy that involves alternating periods of advertising activity and inactivity.

Advertising Schedule

A plan that outlines the timing and frequency of advertising efforts over a certain period.

Media Plan

A strategic document outlining how a company will use various media channels to achieve its marketing goals, including selection of media outlets, scheduling, and budgeting.