You are trying to estimate the cost that a coupon campaign will cost your busine

Question

You are trying to estimate the cost that a coupon campaign will cost your business. You estimate that . 70% of people who receive the coupon will never claim it. This costs you $0.50 per person for coupon production and distribution costs. . 20% of people will claim the coupon but will not generate do any more business with you. This costs you $5.50 per person for the cost of redeeming the coupon plus the distribution costs. . 10% of people will claim the coupon and will become regular customers. These people will generate about $100 in net revenue per person (total profit for the business including the coupon distribution and redeeming costs). Calculate your expected revenue per coupon sent out.

Explanation / Answer

expected revenue from the coupon campaign = 70%*-0.5 + 0.2*-5.5 + 0.10*100

expected revenue from the coupon campaign = 8.55

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