The marketing manager for a growing company is considering launching a new product. To determine consumers' interest in the product, the manager can conduct a focus group that costs $120,000 and has a 70% chance of correctly predicting the success of the product, or hire a consulting firm that costs $400,000 but has a 90% chance of correctly assessing the market. Going directly to the market with no testing is right 50% of the time. If the product launches and is a success, the payoff will be $1.2M. What should the manager do?
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