2.1 Kiens marketing manager has been asked to develop a new promotional strategy for the company, which has been facing stiff competition from some new entrants. After much research she has narrowed down the choice to three strategies and has constructed the decision tree shown below which includes the payoffs and probabilities she has managed to estimate but it is incomplete. She has identified three alternative promotional strategies (and their upfront cost): customer referral programme (35,000); causes and charity (30,000); branded gifts (50,000). The impact on turnover in either case depends on the reach of the promotional campaigns which could be high, medium or low. The payoffs represent the increase in annual sales turnover in 000s over a one-year period (excluding up-front costs).

Required:

1. Complete the decision tree by calculating the value of any missing elements (shown as A, B, C, D, all marked with a *).
2. Use the decision tree to advise the marketing manager on the best option to choose, assuming the company wishes to maximize expected annual sales turnover, net of upfront costs.

Customer Referral Causes & Charity Branded Gifts 80 D High (0.4) 100 Medium (0.45) 90 Low B 20 High (0.25) 40 Medium (0.5), 120 Low (0.25) (* High (0.8) Medium (0.1) Low (0.1) 115 35 10