Firefly Products, Inc., has just completed development of a new line of skin-care products. Preliminary market research indicate two feasible marketing strategies: (1) creating general consumer acceptance through media advertising or (2) creating distributor acceptance through intensive personal selling. Sales estimates for under each marketing alternative are:

A. Assume that the company has a 50 percent profit margin on sales (that is, profits equal one-half of sales revenue). Calculate expected profits for each plan.
B. Construct a simple bar graph of the possible profit outcomes for each plan. Which plan appears to be riskier?
C. Assume that management’s utility function resembles the one illustrated in the following figure. Calculate expected utility for each strategy. Which strategy should the marketing managerrecommend?

Transcribed Image Text:

Media Advertising Personal Selling Strategy Strategy Probability 0.4 0.4 0.1 Sales S500,000 1,500,000 2,500,000 3,500,000 Probability 0.3 0.4 0.3 Sales $1.000,000 1,500,000 2,000,000