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Please Round To One Decimal Point For All Answers.: TH TH

Nike Canada plans to test a direct mail initiative on 20,000 customers selected using the 'Nth' select method, starting with the 30th name and continuing with the 60th and 90th. Justwhiteshirts.com aims to evaluate a catalogue's effectiveness, with a break-even response rate of 9.28% and a minimum test size of 43.1 people per cell, resulting in a total profit of $419.82 from profitable segments and a projected profit of $12,992 if rolled out to all customers in those segments.

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Ruchi Shukla
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7 views2 pages

Please Round To One Decimal Point For All Answers.: TH TH

Nike Canada plans to test a direct mail initiative on 20,000 customers selected using the 'Nth' select method, starting with the 30th name and continuing with the 60th and 90th. Justwhiteshirts.com aims to evaluate a catalogue's effectiveness, with a break-even response rate of 9.28% and a minimum test size of 43.1 people per cell, resulting in a total profit of $419.82 from profitable segments and a projected profit of $12,992 if rolled out to all customers in those segments.

Uploaded by

Ruchi Shukla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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PLEASE ROUND TO ONE DECIMAL POINT FOR ALL ANSWERS.

1. Nike Canada has a database of 600,000 people. As a Marketing Manager, you want to test the
impact of a new direct mail initiative among 20,000 of your most valuable customers. (3 marks)

Using the 'Nth' select concept, they will start by selecting name number __30th__ to ensure they get a
test sample the same percentage of people who have similar characteristics as those contained in the
main database.

What 2 names will they select next?

Answer- 60th & 90th

2. Justwhiteshirts.com has decided to test the idea of a using a catalogue to drive purchases
through their web site. Their database has 175,000 customers that need to be coded before they
test the idea. Incremental cost to send out a catalogue is $2.60 and they make an average profit of
$28 from each sale.

(a) Provide the customers below with an RFM number. (5 marks)

175,000/5= 35,000
1-35,000- 5
35,001-70,000- 4
70,001- 105,000-3
105,001- 140,000-2
140,001-175,000-1

RFM
Customer Rank Order Rank Order Frequency Rank Order
Code Recency Monetary
545 31,000 60,555 555
435 44,444 95,000 10,001
343 75,999 69,999 88,888
352 92,010 1 124,868
221 126,000 133,002 155,000

(b) What is the break-even response rate %? (1 mark)

2.60/28 = 0.0928 *100= 9.28%

(c) How many people do we need to test in each cell to make the test statistically valid? (1 mark)

4/0.0928= 43.1
(d) If justwhiteshirts.com mails to the minimum number of people, what is the break-even dollar cost
for the total test? (2 marks)

43.1 *125* 2.60= $14,007.5

3. Putting the above cells in order and using some information you have already calculated plus
other formulas, complete the chart below assuming the company tests the idea. (5 marks)

# Rollout
Cell Code Cell Size Responses RR% BE RR% BEI cell? Y/N
545 43.1 11 25.52 9.28% + Y
435 43.1 10 23.20 9.28% + Y
343 43.1 6 13.9 9.28% + Y
352 43.1 2 4.64 9.28% - N
221 43.1 0 0 9.28% - N

4. How much profit would you make in the cells in the chart that made money? Show your work. (3
marks)

Segment 545= (11*28) -(43.1*2.60) = 308-112.06= 195.94


Segment 435= (10*28)- (43.1 *2.60) =280-112.06= 167.94
Segment 343= (6*28) -(43.1 * 2.60) = 168-112.06= 55.94

Total Profit= 195.94+167.94+55.94= 419.82

5. If you rolled out the catalogue program to all customers in the profitable cells above, then how
much profit could you make? Show your work. (5 marks)

Step 1- 175,000/125= 1400

Step 2-
Segment 545= 1400* 0.25= 350
Segment 435= 1400*0.23=322
Segment 343= 1400*0.13=182

Step 3
(350*28) -(1400*2.60) =9800-3640=6160
(322*28) -(1400*2.60) =9016-3640=5376
(182*28) -(1400*2.60) =5096-3640=1456

Total Profit- 6160+5376+1456= 12,992

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