Question
Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer
Honey is a technology company that provides online coupons to its subscribers. Honey's analytics staff has developed a classification method to predict whether a customer who has been sent a coupon will apply the coupon toward a purchase. For a sample of customers, the following table lists the classification model's estimated coupon usage probability for a customer. For this particular campaign, suppose that when a customer uses a coupon, Honey receives $1 in revenue from the product sponsor. To target the customer with the coupon offer, Honey incurs a cost of $0.05. Honey will offer a customer a coupon as long as the expected profit of doing so is positive. Using the equation
Expected Profit of Coupon Offer = P(coupon used) Profit if coupon used + (1 - P(coupon used)) Profit if coupon not used
Customer | Probability of Using Coupon |
1 | 0.48 |
2 | 0.34 |
3 | 0.25 |
4 | 0.11 |
5 | 0.04 |
Determine the expected profit for each customer. Round your answers to the nearest cent. Enter negative value as negative number, if any.
Customer | Expected Profit($) |
1 | ?? |
2 | ?? |
3 | ?? |
4 | ?? |
5 | ?? |
The expected profit is positive for customers *select correct answer from below*
(a. 2 & 3
b. 4 & 5
c. 1, 2, & 3
d. 3, 4, & 5
e. 1, 2, 3, & 4
f. 1, 2, 3, & 5
g. 2, 3, 4, & 5
h. 1, 2, 3, 4, & 5), so these customers (should be offered/should not be) offered the coupon.
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