Customer segment research or go directly to market

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B&B has a new baby power ready to market. If the firm goes directly to the market with the product, there is only a 60 percent chance of success. However, if the firm can conduct customer segment research, which will take a year and cost $600,000. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 75 percent. If successful, the baby power will bring a present value profit (at time of initial selling) of $27 million. If unsuccessful, the present value profit is only $5 million. Should the firm conduct customer segment research or go directly to market? The appropriate discount rate is 12 percent.

Reference no: EM131450353

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