Reference no: EM132848024

A Cosmetics Company has developed a new perfume which management feels has tremendous potential. It not only interacts with the user's body chemistry to create a unique fragrance but is especially long-lasting. A total of P100,000 has already been spent on its development. Two marketing plans have been devised. The first plan follows the company's usual practice of giving small samples of the new product when other items in the company's product line are purchased and placing advertisements in popular women's magazines. This plan would cost P70,000, and it is believed that it might result in a high, moderate, or low market response with probabilities of 0.3, 0.3, and 0.4, respectively. The net profit, exclusive of development and promotion costs in these cases would be P600,000, P450,000 and P300,000, respectively. If it later appeared that the market response is going to be low, it would still possible to launch television advertising campaign. The campaign would cost another P70,000. It would change the market response to high or moderate as previously described, with the probabilities of 0.5 each. The second marketing plan is much more aggressive than the first. Its emphasis would be heavily upon television advertising. This plan would cost P100,000. The total response should be either excellent or good with probabilities of 0.6 and 0.4 respectively. The profit exclusive of development and promotion costs would be P650,000 and P400,000 for the two possible outcomes. Identify the optimal sequence of decision to follow.