Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer who has been sent a coupon will apply the coupon toward a purchase. For a sample of customers, the following table lists the classification model's estimated coupon usage probability for a customer. For this particular campaign, suppose that when a customer uses a coupon, Honey receives $1 in revenue from the product sponsor. To target the customer with the coupon offer, Honey incurs a cost of $0.05. Honey will offer a customer a coupon as long as the expected profit of doing so is positive. Using the equation Expected Profit of Coupon Offer = P(coupon used) × Profit if coupon used + (1 - P(coupon used)) × Profit if coupon not used determine which customers should be sent the coupon. Customer Probability of Using Coupon 1 0.48 2 0.34 3 0.28 4 0.11 5 0.06 Determine the expected profit for each customer. Round your answers to the nearest cent. Enter negative value as negative number, if any. Customer Expected Profit 1 $ 2 $ 3 $ 4 $ 5 $ The expected profit is positive for customers , so these customers should be offered, should not be offered the coupon.
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Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer who has been sent a coupon will apply the coupon toward a purchase. For a sample of customers, the following table lists the classification model's estimated coupon usage probability for a customer. For this particular campaign, suppose that when a customer uses a coupon, Honey receives $1 in revenue from the product sponsor. To target the customer with the coupon offer, Honey incurs a cost of $0.05. Honey will offer a customer a coupon as long as the expected profit of doing so is positive. Using the equation Expected Profit of Coupon Offer = P(coupon used) × Profit if coupon used + (1 - P(coupon used)) × Profit if coupon not used determine which customers should be sent the coupon.
Determine the expected profit for each customer. Round your answers to the nearest cent. Enter negative value as negative number, if any.
The expected profit is positive for customers , so these customers should be offered, should not be offered the coupon. |
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