The independent retailer REWE is considering a four-week promotion campaign for beef. To differentiate themselves from...

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The independent retailer REWE is considering a four-week promotion campaign for beef. To differentiate themselves from the dominating grocery retail chains, they plan to promote either organic or pasture raised beef to raise their profile of an environmentally and animal-welfare responsible retailer. Based on past experiences, market intelligence and insights shared through a network of independent retailers, the following scenarios for launching a marketing have been identified. a) Without prior marketing research, for pasture raised beef an outcome with high demand would be equally likely as one with low demand. In case of the former, the contribution margin would be $200,000, in case of the latter it would be $40,000. For organic beef an outcome with high demand would have an estimated probability of 40% and a contribution margin of $250,000, while an outcome with low demand would have a probability of 60% and a contribution margin of $20,000. The contribution margin would be used to cover the cost of the campaign of $20,000. b) Marketing research could be done before launching the campaign to better gauge demand and identify ways to promote the products effectively. It would cost $15,000 to conduct this marketing research. For a $20,000 campaign budget the estimated contribution margins would remain the same as above. But the probabilities for high and low demand would change. First, the research would be expected to confirm a high demand situation in 60% of the time. Only in that case would REWE go ahead with launching a campaign. If they were to go ahead, the probability of actually facing a high demand situation would be 80% for pasture raised beef and 70% for organic beef. c) Also in case of marketing research being done before launching campaign, REWE could double the campaign budget and would expect the following scenarios. For pasture raised beef an outcome with high demand would have a contribution margin of $250,000, and $100,000 in a low demand situation. For organic beef an outcome with high demand would have an estimated contribution margin of $300,000, while an outcome with low demand would have an estimated contribution margin of $40,000. d) Finally, if no promotion campaign was done, the contribution margin for the sustainable beef category would be $30,000 for the four-week period. The independent retailer REWE is considering a four-week promotion campaign for beef. To differentiate themselves from the dominating grocery retail chains, they plan to promote either organic or pasture raised beef to raise their profile of an environmentally and animal-welfare responsible retailer. Based on past experiences, market intelligence and insights shared through a network of independent retailers, the following scenarios for launching a marketing have been identified. a) Without prior marketing research, for pasture raised beef an outcome with high demand would be equally likely as one with low demand. In case of the former, the contribution margin would be $200,000, in case of the latter it would be $40,000. For organic beef an outcome with high demand would have an estimated probability of 40% and a contribution margin of $250,000, while an outcome with low demand would have a probability of 60% and a contribution margin of $20,000. The contribution margin would be used to cover the cost of the campaign of $20,000. b) Marketing research could be done before launching the campaign to better gauge demand and identify ways to promote the products effectively. It would cost $15,000 to conduct this marketing research. For a $20,000 campaign budget the estimated contribution margins would remain the same as above. But the probabilities for high and low demand would change. First, the research would be expected to confirm a high demand situation in 60% of the time. Only in that case would REWE go ahead with launching a campaign. If they were to go ahead, the probability of actually facing a high demand situation would be 80% for pasture raised beef and 70% for organic beef. c) Also in case of marketing research being done before launching campaign, REWE could double the campaign budget and would expect the following scenarios. For pasture raised beef an outcome with high demand would have a contribution margin of $250,000, and $100,000 in a low demand situation. For organic beef an outcome with high demand would have an estimated contribution margin of $300,000, while an outcome with low demand would have an estimated contribution margin of $40,000. d) Finally, if no promotion campaign was done, the contribution margin for the sustainable beef category would be $30,000 for the four-week period.