Question

Toney is a technology company that provides onine coupons to its subscribers. Honcy's analytics staff has developed a classilication method to predict whether a cuistomer who has been sen a coupon wil apply the coupon toward a purchase, for a sample of aistomes, the following table lists the classilication model's estimated coupon usage probabity for a customer.

For this particular campoign, suppose that when a customer uses a coupon, Honey receves $1 in revenue from the product sponsoc. 70 target the customer with the coupon offer, Honey incurs a cost of so.05. Honey will offer a customer a coupon as long as the expected profit of doing 50 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 determine which oustomers should be senk the coupon. Determine the expected profit for each austomer. Round your answers to the nearest cent. Enter negotive value as nepative nurber, if any. The expected profit is postive for customers is these custonets the coupon.

Answer 1

To determine which customers should be sent the coupon, calculate the expected profit for each customer using the provided formula. If the expected profit is positive, the customer should be sent the coupon.

Step-by-step explanation:

To determine which customers should be sent the coupon, we need to calculate the expected profit for each customer. The expected profit of sending a coupon offer to a customer is calculated using the formula:

Expected Profit of Coupon offer = P(coupon used) x Profit if coupon used + (1 - P(coupon used)) x Profit if coupon not used.

For each customer, multiply the coupon usage probability by the profit received from the product sponsor when the coupon is used, and then add the complement of the coupon usage probability multiplied by the negative cost of sending the coupon.

If the result is positive, that customer should be sent the coupon.