Targeted Marketing: Using Conditional Probability

Company officials do a study to determine if there is a relationship between income and the chance that a potential customer will purchase a new vitamin. They know that 50% of the potential customers will buy the vitamins, 40% of the potential customers make under $20,000 and 10% of the potential customers both make under $20,000 andare buyers of the vitamin.

a) Currently, sales are made by selecting a person at random from the phone book; a salesperson is able to make 600 contacts per week. The profit from a sale of one bottle of vitamins is $5. What should a salesperson generate in profits each week, if the above information is representative of the population?

b) An information service will sell you the names and phone numbers of people with incomes over $20,000. If the information costs $2 per name, is it worth purchasing the information?Justify your answer with numbers.Hint: use a Venn Diagram to determine the probability a customer will purchase the product; given that they earn more than $20,000.If you're having trouble drawing the Venn Diagram see the HINT video for this question.

c)Are you comfortable with what they measured? Discuss.

Phase I, goal: What is their goal?

Phase III, What did they measure?

Remember: Goals are related to Forces, you must measure both the Goal and all Forces ofinterest.

d) Phase IV, Who do you measure? What questions would you ask about the sampling methodology?

e)Phase V, How do you measure the Goals and Forces? For these measurements, discuss the issues of accuracy, reliability, and precision.

f) Activate your Relationship and Imagination Thinking Rooms:

EVERYTHING IS RELATED TO EVERYTHING ELSE

Who would you involve in the decision: Should we change our marketing strategy?