Answered: How much should Julie be willing to pay…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Question

The new business venture, Best-In-World, has been manufacturing technology devices for over 2020 years and is considering adding a new technology device to its music line. They have an established reputation for building quality devices, but they are rather novice in the music industry. The Chief Innovation and Design Officer, Julie Naugle-Hall, is tasked with hiring a marketing firm to conduct a survey to determine the feasibility and demand for their new music device. The follow decision table illustrates the potential payoffs for a high demand, moderate demand and low demand for the new music device. The decision will be whether to start production on this new device in small scale, large scale or not at all.

Decision Table

	State of Nature
Alternatives	High Demand	Moderate Demand	Low Demand
Small-scale production	900,000900,000	300,000300,000	−400,000-400,000
Large-scale production	1,700,0001,700,000	700,000700,000	−1,000,000-1,000,000
No production	00	00	00
Probabilities	0.250.25	0.350.35	0.400.40

Step 3 of 3:

How much should Julie be willing to pay a marketing firm to conduct the survey for probability information regarding the feasibility and demand for their new music device?

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