Questions and Answers of Essentials Business Analytics

Marketing Message—A/B Testing. Which is a more effective marketing message— a plain text email or an email with images and design elements? Statistics.com conducted an A/B test in June 2012,
Acceptance of Consumer Loan. Universal Bank has begun a program to encourage its existing customers to borrow viaa consumer loan program. The bank has promoted the loan to 5000 customers, of whom 480
Detecting Spam E-mail (from the UCI Machine Learning Repository). A team at Hewlett–Packard collected data on a large number of e-mail messages from their postmaster and personal e-mail for the
Automobile Accidents. The file accidentsFull.csv contains information on 42,183 actual automobile accidents in 2001 in the United States that involved one of three levels of injury: NO INJURY,
year, took coursea. Consider now the following new prospect:Prospect 1: IT, 1 year Using the above information on the two customers and one prospect, create one dataset for all three with the
Table 5.5 shows a small set of predictive model holdout partition results for a classification model, with both actual values and propensities.a. Calculate error rates, sensitivity, and specificity
Sales of Toyota Corolla Cars. The file ToyotaCorolla.csv contains data on used cars (Toyota Corollas) on sale during late summer of 2004 in the Netherlands. It has 1436 records containing details on
Use the data for the breakfast cereals example in Section to explore and summarize the data as follows: a. Which attributes are quantitative/numerical? Which are nominal?b. Compute the mean, median,
The distance between two records can be measured in several ways. Consider Euclidean distance, measured as the square root of the sum of the squared differences. For the first two records in Table
What is Monte Carlo simulation?
List at least five business problems within the field of pricing a firm can use Monte Carlo simulation to solve and/ or get decision support for.
Evaluate the saying “garbage in = garbage out” in a simulation context.
Run ten trials of random numbers using (1) the RAND() function and (2) the RANDBETWEEN() function with a minimum value of 0 and maximum value of 99.Multiply the ten trials using the RAND() function
The demand for a given product next year will be 150,000 units with a 70% probability.However, there is a 30% chance that demand could drop to 100,000 units because of the uncertainty associated with
New information arrives for the company above. Now the demand could also be as low as 10,000 because two other big clients are considering choosing another supplier. The probability of this is low,
The company must also report expected revenues for budgeting. In that process the management has also asked for the probability of revenues reaching certain thresholds to create bonus payment schemes
Another analyst states that the firm has some market power and suggests that they could set the price higher without losing all demand. Assume now that the demand depends solely on the price the
A company is considering a price increase for one of its products because of increased production costs. The current sales volume is 100,000 units and the expected change in sales volume from the
The company Cool Chairs is producing and selling designer chairs. It is now considering introducing a new chair and has carried out a small survey asking about potential customers’ willingness to
This problem was introduced in the text towards the end of the chapter. The information you need to solve this problem is included in the table below.Interpretation: There is a 50% chance that the
The ice cream shop Icy has just completed a market survey examining expecteddemand at various price levels for one of their products – Icy Cool. The data aresummarized in the table below:You also
In the same market survey, Icy examined the expected demand for another ice creamtype. The data for this product is given below:The variable unit costs for this ice cream type is $0.45 and the fixed
Fill in as many element names as possible in the figure given below: You can, forexample, insert numbers in the boxes and list them next to the figure: e.g., 1.Blackcoffee, sold in a physical coffee
Back to Icy: It turns out that you can also sell Icy Hot at the local sport stadiumduring home games. You have been given information about the (average) expecteddemand at the various price levels
Various approaches to pricing are presented below. Determine what the actual priceset by the firm will be in each case and specify what kind of pricing approach that isused in each case.a. The
What is pricing analytics?
What are the most crucial steps involved in the pricing analytics process?
What is price differentiation?
What conditions must be satisfied for a firm to perform price differentiation?
How can you recognize first, second and third degree price differentiation?
Consider the figure below and answer the following questions:a) If this firm charges a single price of $15, what is the total consumer surplus?b) If the firm charges a single price of $25, what is
A professional soccer club plays home games once a week, but on different weekdays.How can this club segment and price differentiate tickets for their home games using the PRO cube as a starting
What is the optimal subscription for a customer who on average uses 107 MB of data, 261 minutes, 95 texts, and 86 MMS per month, given the information in the tables below. Included in plan Plan A
Focus on the fixed and variable rates of data only (measured in MB) and depict the cost structure of plans A, B, and C as a function of data usage, as done in Figure 3.2. That is, assume that the
Focus on the fixed and variable rates of minutes only and depict the cost structure of plans A, B, and C as a function of minute usage, as done in Figure 3.2. That is, assume that the customer only
Focus on the fixed and variable rates of texts only and depict the cost structure of plans A, B, and C as a function of text usage, as done in Figure 3.2. That is, assume that the customer only uses
Focus on the fixed and variable rates of MMS only and depict the cost structure of plans A, B, and C as a function of MMS usage, as done in Figure 3.2. That is, assume that the customer only uses MMS
What plan should the customers go for in problems 7 to 10? Explain.
(NB: Consult the examples in Chapter 7 if needed). An amusement park will introduce a new pricing scheme before the next season. It wants to set an entrance fee and a fee for each ride in the park. A
List at least three examples of (1) self- selection, (2) time- based, and (3) regional pricing.
Discuss the possible challenges associated with performing price differentiation in practice.
How can the term Big Data be formally defined? Explain.
How can big data sets create business value when it comes to pricing decisions? Give a few examples.
Provide examples of supervised and unsupervised methods and explain the main difference between the two.
What is meant by the term Euclidean distance? Explain.
Give a brief explanation of how the k- nearest neighbor algorithm can be used for classification problems.
What is the main objective of cluster analysis?
Calculate the Euclidean distance between customer 1 and the following neighbors: Haircuts per annum Age 32 Customer Customer 1 Neighbor 1 Neighbor 2 Neighbor 3 8262 12 Distance from city (km) 2282
Use the same data as in problem 7, but now you shall normalize all the values before calculating the Euclidean distances. The means and standard deviations of the various attributes are given
Use the results from problem 8 in combination with the following information about whether the three customers have previously taken advantage of a direct mail offer or not: Neighbor 1 → Yes,
In the Excel solution file accompanying this chapter, a data set on hairdresser customers is included (sheet named P- 12- 10- Data). The data contain information about the various characteristics of
In the Excel solution file accompanying this chapter, a data set on hairdresser customers is included (sheet named ‘P- 12- 11- Data’). The data contain information about various characteristics
Replicate Business problem #3 from the main text of this chapter: Business problem#3: Create a special offer menu in a movie theater kiosk. The data you need are provided in a sheet named “P- 12-
Link weather forecasts for a location of your own choice via Excel’s Power Query.Follow the steps as provided in the main text. You can also try to connect the weather forecast to a prediction
Search the web for access to big data sets and examine if it is possible to get access to these using Excel. Create your own project using some of the techniques provided in this chapter.
A company contacts you to evaluate whether their current price of a widget is optimal or not. The variable costs to produce and sell the widget are $5 per unit and the fixed costs are $10,000.
You just received information about the estimated price– response function for the widget in problem 1.It is estimated to be:Find the optimal price using both calculus and Excel. What is the total
The management is happy with your solution so far, but there is a problem. The current capacity is only 2,000 units. Will this affect your results from problem 2? If so, how?
One analyst in the company contacts you to inform about a recent analysis of the price– demand relationship. She has done more estimations and concluded that a logit price– response function
Use the linear price– response function provided in problem 2 and the general information from problem 1.Illustrate how the MOC and the total profit varies with various capacity levels.
Assume now that the company has identified two segments: (1) students; and (2) the general public. They both have unique price– response functions with the following characteristics:What are the
A newly established hotel wants to make it simple for its customers by offering only two rates: one weekend rate and a midweek rate. The variable costs associated with making each room ready for new
It turns out that introducing lower prices for the weekend induces some customers with great flexibility (such as retirees) to move some of their demand from the higher- priced midweek days to the
The Excel file following Chapter 10 contains five data sets (one of them being the data on hotel room prices analyzed in this chapter). You shall use these data sets to do the following tasks:a)
Not all firms can implement revenue management. Evaluate this statement.
List and discuss characteristics of revenue management industries.
Highlight the difference between a partitioned booking system and a nested booking system.
Consider a hotel chain that has four different booking classes denoted P,Q,R and S. Total capacity stands at 1,000 rooms and a quarter of all rooms are reserved for booking class P. A third of the
Consider the example of the railway company given earlier in this chapter and now suppose that on a different route, demand follows a continuous uniform distribution with minimum demand equal to 140
Demand for an airline’s seats on a short- haul route follows a normal distribution with a mean of 80 and a standard deviation of 20.If the price of an economy fare class Y seat is $200 and that of
Consider a hotel with a 100 rooms capacity that has four different nightly rates for its standard rooms. If the demand for a room across all segments follows a normal distribution with the following
Purple Bricks is a real estate agent based in the U.K.. In 2018, it ran a series of commercials emphasizing that it did not charge commissions, like most other real estate agents, when it handles
Discuss some implications of the prospect theory for pricing. Using the value function, explain why grocery stores will refer to lower prices charged to clubcard members as “loyalty discounts”
Describe two ways a retailer may use mental accounting to maximize profits.
Are consumers affected by fairness? Discuss giving examples.
List five areas where there may exist ambiguity between ethics and the law.
A firm that acts in an unethical manner may hurt itself in the long run. Evaluate this statement.
Describe the terms indifference curve and budget line.
Consider the figure below. What combinations of bananas and bread would this rational consumer choose to consume? Are there any combinations of the two goods that the rational consumer would be
Consider two products: X1 and X2. The price of X1 is $5 and the price of X2 is$10. The consumer has a total budget of $100 per month for these two products.Formulate the budget constraint.
Draw the budget line using the information in problem 3.
Illustrate how a price change of X1 from $5 to 10$ (in problem 3) affects the shape of the budget line.
Use the information in the table below to (1) calculate the aggregate demanded quantity and (2) illustrate this in a price– response function. Price $10.00 Consumer #1 5 Si Consumer #2 6 $20.00 2
Consider the figure below. What area of this figure corresponds to the consumer surplus if the price is equal to $50? What is the size of the consumer surplus? Demanded quantity 0 50 Price (S) 115 50
A company that sells a homogeneous product is operating in a market with many small producers. Can this company use price to increase profits? Explain.
You have the following information about demand (Q), price and costs:What is the profit- maximizing price and quantity? Q 100,000-10,000 P P 10-0.0001Q VC = 5(constant) FC = 10,000
You have the following information about the relation between price and number of units sold for a service offered by a given firm:The variable costs are $20/ unit and the fixed costs are $500.
Do the same as in problem 10, but now assume that the fixed costs jump from $500 to $1,000 if going from 20 to 30 units sold. What is now the profit- maximizing price/ quantity?
What is markdown optimization and how does it differ from variable pricing?
Consider the charts below. Which of these illustrate a markdown? Explain. Price Price 500 400 300 Price 500 400 300 200 100 200 100 0 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 Period 5 6 7 8 9 10 11 12
Create the step charts illustrated in problem 2 in Excel.
What can you say about the sales level and season length of the products below,based on an illustration of their product life cycles? 1400 1200 1000 800 600 400 200 0 Product life cycle (PLC):
Play around with the various shapes of product life cycles and discuss what productsor product categories each shape could be in real life.
Consider a firm selling swimming shorts. The price– response function can bedescribed by d ( p) = 10,000 −100p. Calculate the optimal two-p eriod prices in thecases of no cannibalization, 20%
The firm in problem 6 decides to evaluate the possibility to introduce multi- periodpricing for its swimming shorts. Calculate the optimal multi- period prices whenusing two, three, four and five
Another firm selling a widget with seasonal demand is facing the following price–response functions for the remaining four periods of the widget’s season:The salvage value of unsold units at the
Use the information from problem 8.What are the optimal dynamic prices of thiswidget? How much is the total profit improved if dynamically adjusting the priceinstead of using the static price?
Calculate the break- even sales volume for a company where the market price is$25, the variable unit costs are $10 and the fixed costs are $25,000. Verify your calculations by calculating the profit
A coffee shop is considering investing in a new machine that produces a brand new type of coffee. The manager believes the new type of coffee can be sold for $5/ unit.The variable cost is $3/ unit.
If the coffee shop in the previous problem sells ten cups of the new coffee per day on average, how many days will it take to break even?

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