In the mid-eighties, the Toro company launched a promotion in which snow blower purchasers could refund a portion of their purchase if the next winter brought modest snowfalls. The amount of their refund was tied to snowfall amounts and so, the program was prey to certain risks and uncertainties. You will explore those risks and choices from a variety of perspectives.
Review the Toro Company's S’No Risk Program” from this module’s assigned readings.
Analyze the risks of the program from the following points of view:
- The insurance company
- The consumers
Write a 6–8-page analysis paper that addresses the following:
- Why did the insurance company raise the rates so much? How would you estimate a fair insurance rate?
- From the perspective of the consumer, how were the paybacks structured and how might they be restructured to entice you at an equal or lower cost of insurance? How does the program influence your decision to purchase?
- What are the common decision traps which each group in point (2) is susceptible to? Develop a matrix or decision tree in order to compare the groups. How does the program impact the consumer’s “regret”? (Hint: Map the possible outcomes for the consumer.)
- From either Toro’s or the insurance company’s perspective, how would you frame your argument to achieve your desired objective?
- Was the program successful? Why or why not?
- If you were the Toro Company director of marketing for Consumer Products, would you repeat the program? Assume you manage the S’No Risk program and argue your case to the director. To what biases are you susceptible in this case?
Submit your analysis paper in Word format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M3_A2.doc.