The Icebox Breakfast Foods Company is considering marketing a new breakfast cereal. If the new cere successful, it will mean a USD 10 million profit (present value) over the life of the product. If unsuccess USD 2 million, loss on investment will be incurred. Management currently feels there is a 50-50 chanc the product will be successful. Two market research firms have approached Icebox with proposals to obtain more information. EG Su collects data on consumer attitudes with respect to specific characteristics of a product, such as swee caloric content, nutritive value, etc., and produces a forecast of "success" or "fail". Of the studies this company has performed on similar products recently, their experience has been as follows: EG Surveys Forecast Actual Outcome Success Failure Success 20 Failure 5 20 A second company, Liquid Company Inc.; performs analysis in an entirely different, independent mani This company performs extensive analysis on competitive products and produce a recommendation c success" or "failure" based on the anticipated amount and oauality of competitive products. Their
The Icebox Breakfast Foods Company is considering marketing a new breakfast cereal. If the new cere successful, it will mean a USD 10 million profit (present value) over the life of the product. If unsuccess USD 2 million, loss on investment will be incurred. Management currently feels there is a 50-50 chanc the product will be successful. Two market research firms have approached Icebox with proposals to obtain more information. EG Su collects data on consumer attitudes with respect to specific characteristics of a product, such as swee caloric content, nutritive value, etc., and produces a forecast of "success" or "fail". Of the studies this company has performed on similar products recently, their experience has been as follows: EG Surveys Forecast Actual Outcome Success Failure Success 20 Failure 5 20 A second company, Liquid Company Inc.; performs analysis in an entirely different, independent mani This company performs extensive analysis on competitive products and produce a recommendation c success" or "failure" based on the anticipated amount and oauality of competitive products. Their
Chapter6: Target Markets: Segmentation And Evaluation
Section: Chapter Questions
Problem 17DRQ: Under what conditions might a firm use multiple forecasting methods?
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Question
![The Icebox Breakfast Foods Company is considering marketing a new breakfast cereal. If the new cereal s
successful, it will mean a USD 10 million profit (present value) over the life of the product. If unsuccessful,.
USD 2 million, loss on investment will be incurred. Management currently feels there is a 50-50 chance th
the product will be successful.
Two market research firms have approached Icebox with proposals to obtain more information. EG Survey
collects data on consumer attitudes with respect to specific characteristics of a product, such as sweetnes
caloric content, nutritive value, etc., and produces a forecast of "success" or "fail". Of the studies this
company has performed on similar products recently, their experience has been as follows:
EG Surveys
Forecast
Actual Outcome
Success
Failure
Success
20
Failure
20
A second company, Liquid Company Inc.; performs analysis in an entirely different, independent manner.
This company performs extensive analysis on competitive products and produce a recommendation of
"success" or "failure" based on the anticipated amount and quality of competitive products. Their
experience with 50 studies has been as follows:
Liquid Company Experience
Forecast
Actual Outcome
Success
Failure
Success
22
3
Failure
25
EG Surveys charges USD 100,000 per survey, while Liquid Company charges USD 150,000.
a. Consider only EG Surveys. Use a decision tree to decide whether Breezy should purchase this survey.
b. Consider only Liquid Company, Inc. Use a decision tree to decide whether Breezy should purchase this
survey.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b277077-8b85-4fba-90a9-9a7b7f0594b8%2F7b4d3038-3fbe-447a-81b9-6a7a83d15289%2Fp5ygdik_processed.png&w=3840&q=75)
Transcribed Image Text:The Icebox Breakfast Foods Company is considering marketing a new breakfast cereal. If the new cereal s
successful, it will mean a USD 10 million profit (present value) over the life of the product. If unsuccessful,.
USD 2 million, loss on investment will be incurred. Management currently feels there is a 50-50 chance th
the product will be successful.
Two market research firms have approached Icebox with proposals to obtain more information. EG Survey
collects data on consumer attitudes with respect to specific characteristics of a product, such as sweetnes
caloric content, nutritive value, etc., and produces a forecast of "success" or "fail". Of the studies this
company has performed on similar products recently, their experience has been as follows:
EG Surveys
Forecast
Actual Outcome
Success
Failure
Success
20
Failure
20
A second company, Liquid Company Inc.; performs analysis in an entirely different, independent manner.
This company performs extensive analysis on competitive products and produce a recommendation of
"success" or "failure" based on the anticipated amount and quality of competitive products. Their
experience with 50 studies has been as follows:
Liquid Company Experience
Forecast
Actual Outcome
Success
Failure
Success
22
3
Failure
25
EG Surveys charges USD 100,000 per survey, while Liquid Company charges USD 150,000.
a. Consider only EG Surveys. Use a decision tree to decide whether Breezy should purchase this survey.
b. Consider only Liquid Company, Inc. Use a decision tree to decide whether Breezy should purchase this
survey.
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