LARKIN CORPORATION
Larkin Corporation conducted a test designed to evaluate the effectiveness of a new television advertisement for one of its household products. The particular television advertisement was shown in a test market for a two-week period. In a follow-up study, randomly selected individuals were contacted by telephone and asked a series of questions to determine whether they could recall the message in the television advertisement and how likely they were to purchase the product. The test market study provided the following probabilities:
Individual could recall the message - 0.40
Individual could not recall the message - 0.60
Further, response to the question of how likely they were to purchase the product provided the following probabilities:
|
IF
|
Purchase
|
|
Definitely No
|
Uncertain
|
Definitely Yes
|
|
Could recall the message
|
0.30
|
0.30
|
0.40
|
|
Could not recall the message
|
0.50
|
0.40
|
0.10
|
For example, if an individual could not recall the message there is a 10% chance that they would definitely purchase the household product.
Larkin Corporation management is interested in knowing what is the overall probability of an individual answering "definitely yes" to the likelihood of purchase question using simulation for 1,000 trials.