Practice problems 7

Practice Problem Set 7 1. Which of the following is INCORRECT about RFM analysis a) Based on demographic data b) Each of recency, frequency and monetary factors is equally important in the analysis c) Applies to existing and prospective customers d) All the above 2. Recall the Bookbinders case where the company was planning to send a physical mail to its customers. The cost of mailing the offer is 25 cents, procurement price of the book is $10, selling price of the book is $18 (does not include shipping) and shipping costs are charged at actuals. What is the break-even response rate for this marketing initiative? 3. In binary logistic regression: a) The dependent variable is continuous. b) The dependent variable is divided into two equal subcategories. c) The dependent variable consists of two categories. d) There is no dependent variable A researcher carried out a survey of 668 nationally representative voters to gauge the support (=1) or opposition (=0) for Affordable Care Act ("Obamacare") and is planning to run a logit model to quantify the effects of different variables like age (in years), income (in thousands of dollars) and political affiliation (whether Democrat (=1) or Republican (=0)) on the support for Obamacare. Suppose we ran a logit model and the following were the raw coefficient estimates: Constant: -2.0 (p-value=0.00), Age: -0.05 (p-value=0.03, SD of this var in the data=7), Income: 0.03 (p-value=0.025, SD of this var in the data =10), Political Affiliation: 3.00 (p-value=0.00, SD of this var in the data =0.1) Question 4. What is the probability that a 25-year old republican with an annual income of 80K is not an Obamacare supporter? (a) 29.94% (b) 42.56% (c) 57.44% (d) 70.06% Question 5. I nterpret the “Income” coefficient in the above logistic regression. Describe in words in detail and be specific in your interpretations.

Q6. Based on some assumptions, an analyst calculated the customer lifetime value for an Auto-Pay customer as $1200 and Non-Auto-Pay customer as $1000. In order to persuade customers to switch to Auto-Pay from Non-Auto-Pay, what is an appropriate promotion amount to spend? (1) $100 (2) $500 (3) $1000 (4) $1200 Q7 . A catalogue marketer has 1000 customers. The contribution margin of the consumers is $100 on average. The retention rate is 60% on average and no retention spending. Assume a 15 percent discount rate. What is the customer life time value on average? Q8. Marketing spend on consumers can be categorized into: (1) Acquisition (2) Development (3) Retention (4) All of the above Q9 . Mario Brothers pizza provides a subscription weekly meal delivery service. What is the long-term multiplier? Average monthly net margin: $25 Retention rate (r): 95% Monthly discount rate (s): 2% a) 14.57 b) 13.57 c) $364.25 d) $25 Question 10 : Demographic variables are so frequently used in market segmentation because they: a) Create smaller segments than other data b) Create easy to reach segments than other data c) Are easy to measure compared to other data d) Have fewer attributes compared to other data Question 11 : As a marketing manager, what should you look at in the regression output to determine the significance of the relationship among variables? a) P-value b) R-squared c) Coefficients

Question 17 . In the regression model Y = a + b x + ε the change in Y for a one unit increase in x: a) will always be the same amount, a b) will always be the same amount, b c) will depend on the error term d) will depend on the level of x Question 18 . In a multiple regression model, where the x's are independent variables and y is the dependent variable, multicollinearity occurs when: a) the x's provide redundant information about y b) the x's provide complementary information about y c) the x's are used to construct multiple lines, all of which are good predictors of y d) the x's are used to construct multiple lines, all of which are bad predictors of y Question 19 . What does it mean to say that a regression coefficient is statistically significant? (one sentence) Question 20 . What are the Marketing Mix Modeling Building Blocks? a. Measure – Forecast – Optimize b. Measure – Evaluation – Prediction – Optimize c. Measure – Deployment – Prediction – Optimize Question 21 . The Base in MMM is driven by: a. The previous marketing activities b. The present marketing activities c. The previous and present marketing activities Question 22 . What is the scale of measurement: Types of movies (drama, comedy, adventure, documentary, etc.) Question 23 . What is the scale of measurement: To record age Question 24. The proportion of the variation explained by the regression model by: a) r b) R 2 c) σ 2 Question 25 . Your friend carries out an AB test correctly. She claims that there is probabilistic equivalence between the A and the B groups. Is she correct?