Marketing 347 -- new product development assignment

ASSIGNMENT 3 (MKTG 347) Total Points = 100 Neatness and Visual Quality of Written Presentation = 5 bonus points

1. The following table shows purchases for a consumer panel consisting of six individuals. Time periods are shown from the first week after the launch of a new brand through the 10th week of the test market.

Week after launch Consumer#

1 2 3 4 5 6 7 8 9 10

1 C N N N N N N N N N

2 C N N N C N C N C N

3 C C C N C C N C C C

4 C C C C C C C C C C

5 C N C C C N C C C C

6 C C C C C C C C C C

Assuming this sample panel is completely representative of the market; forecast the long term market share for the new brand. (50 points)

2. Company X wants to decide if it should undertake a test market for a new product it plans to launch. If the new product is launched without a test market being conducted, and if it is successful, the company expects an inflow of $ 20 million. If the company were to conduct a test market and then launch an improved product, the launch is expected to bring in $ 21 million. A failure loses $ 10 million; and a test market costs $ 3 million (See figure in page 2 for details)

a. Compute the expected values of the outcomes for each of the nine end- nodes of the decision tree and fill in the appropriate numbers in the boxes provided. (10 points)

b. What is your decision? (To test market or not to test market). Show all you

computations and describe the decision process. (40 points)

Note: Please show detailed and step-wise computations for both questions.

Outcomes ($ millions) Success(.9)

2

Good (0.5)

Test Market Bad (0.5)

Go

No

No test market

Fail (.1)

No Sales

Fail (.9)

Success (.1)

Go

No Sales

Success (.5)

Fail (.5)

No Sales

Go

No

No