Watson recently was appointed executive director of a charitable foundation. The foundation raises money for its activities

Question:

Watson recently was appointed executive director of a charitable foundation. The foundation raises money for its activities in a variety of ways, but the most important source of funds is an annual mail campaign. Although large amounts of money are raised each year from this campaign, the year-to-year growth in the amount derived from this solicitation has been lower than expected by the foundation's board. In addition, the board wants the mail campaign to project the image of a well-run and fiscally responsible organization to build a base for future contributions. Consequently, the major focus of Watson's first-year efforts will be devoted to the mail campaign.
The campaign takes place in the spring of each year. The foundation staff makes every effort to secure newspaper, radio, and television coverage of the foundation's activities for several weeks before the mailing. In previous years, the foundation has mailed brochures that described its charitable activities to a large number of people and requested contributions from them. The addresses for the mailing are generated from the foundation's own file of past contributors and from mailing lists purchased from brokers.
The foundation staff is considering three alternative brochures for use in the upcoming campaign. All three will be 8 1/2 by 11 inches in size. The simplest and the one most likely to be available on a timely basis for bulk mailing is a sheet of white paper with a printed explanation of the foundation's program and a request for funds. A more expensive brochure on colored stock contains pictures as well as printed copy. However, this brochure may not be ready in time to take advantage of bulk postal rates, but there is no doubt that it can be ready in time for mailing at first-class postal rates. The third alternative is an elegant, multicolored brochure printed on glossy paper with photographs as well as printed copy. The printer assures the staff that it will be ready on time to meet the first-class mailing schedule, but asks for a delivery date one week later just in case there are production problems.

The foundation staff has assembled the following cost and gross revenue information for mailing the three alternative brochures to 2,000,000 potential contributors:
The postal rates are 4 cents per item for bulk mail and 26 cents per item for presorted first-class mail. First-class mail is more likely to be delivered on a timely basis than bulk mail. Outside companies hired to handle the mailing will charge 1 cent per unit for the plain and colored paper brochures and 2 cents per unit for the glossy paper one.
Required:
(1) Calculate the net revenue potential for each brochure for each viable mailing alternative.
(2) The foundation must choose one of the three brochures for this year's campaign. The criteria established by the board-net revenue potential, image as a well-run organization, and images as a fiscally responsible organization-must be considered when the choice is made. Evaluate the three alternative brochures in terms of the three criteria.