Suppose that in Exercise 25.34 a sample of size 5 showed that only one person believed the new ad. In light of this additional information, what should the manager do?
Suppose that in Exercise 25.33 it is possible to perform a survey to determine the percentage of people who believed the ad. What would a sample of size 1 be worth?
Credibility is often the most effective feature of an advertising campaign. Suppose that, for a particular advertisement, 32% of people surveyed believed what the ad claimed. A marketing manager believes that for each one-point increase in that percentage, annual sales will increase by $1 million. For each one-point decrease, annual sales will decrease by $1 million. The manager believes that a change in the advertising approach can influence the ad’s credibility. The probability distribution of the potential changes is listed below. If for each dollar of sales the profit contribution is 10 cents and the overall cost of changing the ad is $58 000, should the ad be changed?
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