Costco's CMO wants to assess the effectiveness of a yearlong marketing campaign that was designed to encourage customers to upgrade from a $50 to $100 membership. The campaign ran for all of 2015 and was offered to all current $50 members. The upgraded $100 membership offers customers 2% cashback on their annual spending at
Costco. To encourage customers to upgrade, Costco offered 10% off of a customer's order. The customer could apply the 10% off to any order less than $500.
Costco decided to run this campaign because $100 members are much more profitable than $50, as shown in the table below. They hoped that by encouraging customers to upgrade that they would see a lift in trips in spending The Costco team hoped to see an increase of $700 in spending per year when a customer upgraded from a $50 membership to a $100 membership, but they were disappointed to learn that they only achieved half of the increase in spending. 

Now they are trying to understand what happened.
1. Provide at least three reasons why a member might upgrade from $50 to $100 (brainstorm, use your intuition and judgement) [5 Pts]

2. Explain why the new $100 members spend more per trip, shop more often and spend more in total than members that don't upgrade in the Test Period (again, use your
judgement) [5 Pts]

3. Explain why the new $100 members perform worse on those same metrics versus existing $100 members in the Test Period (again, use your judgement) [5 Pts]

4. Use difference-in-difference to compare $50 members who upgrade with those that did not Before & After the promotion. Then explain why this approach is not valid and relate this to your answers in (1), (2) and/or (3). [10 Pts]

Membership 50 100 Average of trip_yr Average of avg_spend Average of avg_spend_yr 11.68 $ 14.76 $ 142 $ 159 $ 1,630 2,328