New Product Marketing: A Case Study in Decision‐Making Under Uncertainty

Lawrence Harris

Journal of the Royal Statistical Society Series C, 1967, vol. 16, issue 1, 39-42

Abstract: A company is given the opportunity to market a new product by the original manufacturer, but must decide quickly whether to do so since its competitors also desire exclusive rights to the distribution of the product. The company's product planning committee assesses a prior distribution of the states of the world, the proportion of potential users who would purchase the new product. A beta distribution is chosen by means of specifying the mean and the mode of the distribution. A prior analysis is performed and it is determined that the optimal act is to market the new product. Preliminary agreement is made with the original manufacturer, the cost of uncertainty determines the size of the sample, the sample is taken and the posterior distribution obtained. A posterior analysis is performed and as a result the company signs a final contract with the original manufacturer for the exclusive rights to the new product.

Date: 1967
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