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 $0.20 in revenue from the product sponsor. To target the customer with the coupon offer, Honey incurs a cost of $0.01. Honey will offer a customer a coupon as long as the expected profit of doing so is positive. Use the following equation to determine which customers should be sent the coupon.

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Expected Profit of Coupon Offer = P(coupon used) X Profit if coupon used + (1 - P(coupon used)) X Profit if coupon not used Customer Probability of Using Coupon 345 1 2 3 0.49 0.36 0.27 0.11 5 0.04