Decision Modeling & Analysis
Decision 1: Entering the metaverse with virtual goods
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Decision Tree
Our resulting decision tree reinforces the decision Flourish is facing to stick to traditional marketing channels, or explore new digital marketing channels. It encompasses the chance of high conversion, moderate conversion, low conversion rates. The corresponding probabilities are 15.84% for high and low conversions, with a probability of moderate conversions at 68.33%. We can see based on this outcome we have the highest probability of achieving a medium conversion rate. The decision tree also displays our expected value of the investment being 835. Based on this we can see we would have a positive return on brand image and we recommend the Flourish team enter the metaverse and invest into the space.
Our decision tree supports the recommendation for Flourish to invest in the metaverse. The model incorporates uncertainty through three conversion rate scenarios: high, moderate, low, and associated probabilities of 15.84% for high and low conversions and 68.33% for moderate conversions. This indicates the most likely outcome is a moderate conversion rate, where brand image impact remains above the benchmark threshold of 800.
The calculated Brand Image Impact (BI) from our tree is 835, which in total exceeds 800 which is the value Flourish leadership associates with maintaining their current strategy. This suggests that investing in the metaverse will yield a net positive brand outcome.
Risk Profile
From our risk profiles we can conclude that while the "traditional marketing channels" option guarantees a BI score of 800, the "digital marketing channels" option has some uncertainty with varying outcomes of underperforming and outperforming the 800 threshold. The cumulative probability profile reinforces the advantage of investing and visualizes how only a small fraction of the outcomes fall below 800. While we do not see dominance, it is clear the invest option is greater than the option to not invest most of the time. In the probability distribution profile we can see there is a small chance of the "digital marketing channels" option resulting in a very small return well below 800, at around 400. However, there is a much greater probability, over 80%, that the "digital marketing channels" option will result in values well above the required benchmark set in the "traditional marketing channels" option. This aligns with our other analyses and reinforces our recommendation to Flourish management to move forward with investing in the metaverse.
Results and Recommendations
With the given information about traffic and expected conversion rates, we have analyzed Flourish's potential investment in the metaverse and offer a virtual focused experience. We have determined that the expected return of the investment is 835 and the risk profiles indicate the decision to invest offers brand image impact returns that have a high probability of outperforming the alternative decision to continue traditional brand image efforts. As a result of our analyses, we recommend investing in the metaverse market to Flourish managers as it is a strategically sound decision and very likely to deliver a positive brand image return under most realistic conditions.
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