A large information technology (IT) company sells a software product designed to help protect an organizations data. The companys market research has determined that hospitals and other medical organizations in its market area have a 1.3 percent chance of losing some of a patients data over a five-year period. With the IT companys software, the chances of patient data loss for a five-year period are reduced to 0.12 percent.

Further, the market research has determined that, when patient data loss occurs, there is a 15 percent chance that the organization will lose the patients business and a 0.75 percent chance that a lawsuit will result. The average cost of losing a patients business is $600 in promotion expenses and other start-up costs to acquire a new patient. The average cost of a lawsuit is $100,000.

Given these research findings, calculate the value of this data-protection benefit of the IT companys software product to a medical organization that keeps data records on 20,000 patients.

5. The marketing manager of an automobile battery manufacturer is considering the prices that should be set for some new additions to the companys product line. The Basic is the standard model, which sells to consumers for $54. The Security is a new model that features power drain protectionthe ability to turn off sources of excessive battery drain, such as headlights left on when the vehicle is parked. The Security Plus is a new model that features not only power drain protection but also includes a small backup battery that will start a car three to five times if the primary battery goes dead for any reason.

The manager commissioned a conjoint study in which 300 automobile owners were asked to rank their preferences among a set of alternative batteries, each containing different features and prices. Dummy-variable coding was used for the power-drain protection and backup battery variables. The price variable was coded in dollars. A regression analysis on the responses of these consumers produced the following regression coefficients:

Variable	Coefficient
Presence of power drain protection	11.31
Presence of backup battery	23.08
Price	0.82

1. Based on this data, calculate an appropriate price to retailers for the Security model. Assume that retailers take a 40 percent gross margin on car batteries.

(b) Based on this data, calculate an appropriate price to retailers for the Security Plus model. Again, assume that retailers take a 40 percent gross margin on car batteries.