A firm that sells software services has been piloting a new product and has reco
ID: 3042471 • Letter: A
Question
A firm that sells software services has been piloting a new product and has records of 500 customers who have either bought the services or decided not to. The target value is the estimated profit from each sale (excluding sales costs). The global mean is $2,128. However, the cost of the sales effort is not cheap – the company figures it comes to $2500 for each of the 500 customers (whether or not they buy).
If the company begins working witha new set of 1000 customer sample to sell the same service, similar to the 500 in the pilot study, will the estimated profit be twice as much or the same?
Explanation / Answer
The estimated profit per sale would be the same because the cost of sales effort and the expected profit is same per sale.
TOtal expected profit is expected to be twice and twice the customer base is being targetted.
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