Essay on Analysis of Toro's Snorisk Program
Risk analysis from the point of view of Toro: Toro bears relatively minimal risk on this S’No risk program the year they ran it, as the most they are going to pay-out to the insurance company in 1983 is around $680K, while in-turn profiting $106K. (Bell, 2004). The year they ran the promotion, a confluence of elements came into play: the insurance company erroneously quoted them 2.1% of the retail value of the snowthrowers covered; the snowfall was significantly higher than the year before, but because of this premium cap by the insurance company, it did not lose its shorts on its liabilities. Additionally, they did not have to pay vendors the 10 percent discount they normally did in …show more content…
As a consumer the key decision-making components for the consumer me are– uncertainty and compromise that results from the unknown: what will be the amount of snowfall that year. The consumer is also focused on the “mental accounting” (Kahneman, 1984) of purchasing the snowthrower that season; not analyzing the use it will bring in subsequent years. The heuristics at play include “anchoring” by either overestimating or underestimating the amount of snowfall, using the previous year as a benchmark (Simonson, 1992).
Common Decision Traps. For all of the groups involved common decision traps are inevitable. The consumer is likely to face the anchoring decision trap, by giving weight to the information that is most prevalent in his mind. He may overestimate the amount of lack of snowfall based on last year’s total and make the decision to buy the snowthrower within the parameters of the program. The consumer can also face the prospect theory, more specifically