1. A SOFTWHITE STORY1
Mr. Kumar, Marketing Manager of NS Chemicals is reading the report on SOFTWHITE,
prepared for him by Trimurthi Marketing Services (TMS). TMS, in their report, analysed the
market for the new type of detergents, which are environmental friendly and meant to "change
the way you wash your clothes". SOFTWHITE is one such detergent developed by NS
Chemicals and the product is ready for launch. Mr. Kumar wanted a thorough study of the
market conditions and the possible success of his brand so that the launch can be backed up by
proper advertisement campaign. Considering the financial condition of NS Chemicals, Kumar
prefers a small advertisement budget for the launch, even though he could manage a large
advertisement budget, provided he is sure of the impact of such large advertisement budget.
The analysis of TMS suggests two possible market conditions for SOFTWHITE, (they are
referred to as LOW and HIGH), based on the proportion of detergent users likely to purchase
SOFTWHITE. The market conditions are deemed to be LOW if 20% of the users will purchase
SOFTWHITE. On the other hand, it is considered to be HIGH if 40% of the users will purchase
SOFTWHITE. Their report concluded that the possible profits to the company depend not only
on the market conditions, but also on the effectiveness of the advertisement, which in their
opinion, depend on the advertisement budget.
Mr. Kumar's attention is drawn to the following table containing the estimated profits from the
SOFTWHITE launch.
Advertisement Market Condition
Budget -------------------------
LOW HIGH
-----------------------------------------------------------------------
SMALL 10 100
LARGE -20 200
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These figures are in Rs. lakh. (i.e., if the company opts for LARGE Advertisement Budget, and
the market conditions turnout to be LOW, the company incurs a loss of Rs. 20 lakh).
Even though the above figures are only estimates, TMS is certain that the actual profits will be
very close to these estimates. The concluding section of their report recommended a Large
advertisement budget considering the fact that they have assigned a probability of 0.4 for HIGH
market conditions.
1
V. Nagadevara, Indian Institute of Management

2. Suma, one of the directors of the company felt that, there is a need for a "first hand" feel
for the market conditions and the possible response of the users to SOFTWHITE. She
was suggesting a quick survey of 20 households, selected randomly and independently.
She suggested t at the response be classified into 3 categories - GOOD (if more than 9
h
households purchase SOFTWHITE); AVERAGE (if 6 to 9 households purchase
SOFTWHITE and BAD (if less than 6 households purchase SOFTWHITE). She also felt
that if the response is BAD, then there is no need at all even to consider a large
advertisement budget and that the company should decide to go with TMS's
recommendation, if the response turns out to be GOOD. She argued that even though the
sample is small, the information obtained would be very valuable and it can facilitate the
decision making with respect to Small or Large advertisement budget. Of course, there is
a question of how much should the company pay for such a survey.
What should Mr. Kumar do?