In the mid-eighties, the Toro company launched a promotion in which snow blower purchasers could refund a portion of their purchase if the next winter brought modest snowfalls. The amount of their...

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In the mid-eighties, the Toro company launched a promotion in which snow blower purchasers could refund a portion of their purchase if the next winter brought modest snowfalls. The amount of their refund was tied to snowfall amounts and so, the program was prey to certain risks and uncertainties. You will explore those risks and choices from a variety of perspectives. Review the case study “The Toro Company S’No Risk Program” by David E. Bell (1994).


Analyze the risks of the program from the following points of view:



  1. Toro

  2. Theinsurance company

  3. The consumers


Write a 6–8-page analysis paper that addresses the following:



  1. Why did the insurance company raise the rates so much? How would you estimate a fair insurance rate?

  2. From the perspective of the consumer, how were the paybacks structured and how might they be restructured to entice you at an equal or lower cost of insurance? How does the program influence your decision to purchase?

  3. What are the common decision traps which each group in point (2) is susceptible to? Develop a matrix or decision tree in order to compare the groups. How does the program impact the consumer’s “regret”? (Hint: Map the possible outcomes for the consumer.)

  4. From either Toro’s or the insurance company’s perspective, how would you frame your argument to achieve your desired objective?

  5. Was the program successful? Why or why not?

  6. If you were Dick Pollick, would you repeat the program? Assume you manage the S’No Risk program and argue your case. To what biases are you susceptible in this case?



Answered Same DayDec 31, 2021

Answer To: In the mid-eighties, the Toro company launched a promotion in which snow blower purchasers could...

Robert answered on Dec 31 2021
103 Votes
In 1914 Toro started as a manufacturer of tractor engines and later started manufacturing
lawn movers as well, in 1960’s company took a critical decision to enter into a new segment and
added snow thrower to their list of items and by year 1984 Toro entered completely into outdoor
car
e products market. List of customers consists of both institutional as well as residential
customers, improved and wide range of products offered by Toro helped it to increase the scope
of market for itself and cater both segments of market. Now Toro is catering needs of
institutional as well as residential customers, residential lawn care services is one of the highest
revenue producing line of business of Toro, rest of the revenue comes from all other products
and services offered by Toro. (Bell, David E. 1994)
This article is written pursuant to a program undertaken by Toro to increase sale of snow
throwers, S’ No risk program is introduced to boost the sale of snow throwers which is highly
dependent on the level of snow fall. Snow throwers are being sold by the company by the help of
its channel of distribution which consist of 26 distributors; these distributors are responsible for
selling snow throwers to retailers and mass merchandisers. During year 1978-79 and 1979-80
Toro experienced substantial rise in the sale of single stage and two stage snow throwers.
Whereas in year 1980-81 the low level of snowfall resulted in loss of sales of snow throwers, in
year 1980-81 due to less sales the inventory of snow throwers piled up leading to high amount of
inventory of snow throwers at the end of the season. The inventory accumulated during 1980-81
was lying in the stores for a period of three years. In order to avoid such fall in sales due to
adverse climate condition company has implemented S’ No risk program. (Bell, David E. 1994)
The initiator of S’ No risk program was an idea given by Good Weather, Good weather is
an organization which deals in providing insurance services for weather related business losses.
Susan Erdahl (program manager of Toro) is the person to whom Good Weather approached and
suggested him to opt for an insurance policy, this insurance policy suggested by Good Weather
will cover the loss of amount refunded by the company to customer due to low sales of snow
throwers which is result of lower snow fall. S’ No risk program is a promotional program under
which the company will refund money to the customers buying Shovels (except those buying
power shovel). In order to make the scheme more interesting the amount of refund is not fixed
rather it is kept variable, the amount of refund will be dependent upon the level of snowfall
which will be measured on the basis of the data provided by various weather stations. (Bell,
David E. 1994)
Payback structure to attract customers
In order to make offer more...
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