pg. 136 question 5.6 from Data Mining for Business Analytic 3rd edition

5.6 pg 137

a. If the company begins working with a new set of 1000 leads to sell the same services, similar to the 500 in the pilot study, without any use of predictive modeling to target sales efforts, what is the estimated profit?

Estimated Current Profit with 500 samples

500 * $2128 = $1,064,000

Estimated Profit with 1000 samples

1000 * $2128 = $2,128,000

The estimated profit from each sale remains the same. However, total estimated profit will increase as we are assuming there is no additional cost(s) incurred for the additional 500 samples. The sales cost per sample is still $2,500 and is a variable cost which remains the same per unit even if you double the size of samples.

b. If the firm wants the average profit on each sale to at least double the sales effort cost, and applies an appropriate cutoff with this predictive model to a new set of 1000 leads, how far down the new list of 1000 should it proceed (how many deciles)?

c. Still considering the new list of 1000 leads, if the company applies this predictive model with a lower cutoff of $2500, how far should it proceed down the ranked leads, in terms of deciles?