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Alpha Leval and P-Level

You are a brand manager and have been running general TV spots to market your product. Now, you are considering running a series of spots that specifically targets wealthy consumers. The spots will cost $2K out of your $100K advertising budget. You estimate the market potential for wealthy consumers to be $250K. You hire a marketing research firm to conduct a survey that will help you determine if wealthy consumers will respond more favorably to the spots targeted towards them than the general spots. The researcher suggests you "use an alpha level = .05."

Explain in managerial terms what is meant by "use an alpha level = .05." Do you agree with her suggestion? If so, explain why. If not, explain why and indicate the alpha level you would use instead.

After conducting the research, the researcher reports that wealthy consumers did in fact respond more favorably to the spots targeted towards them than the general spots (p = .12). Explain in managerial terms what is meant by p = .12. Given your answer to question 1a, what managerial action would you undertake?

Solution Preview

"Use an alpha level=.05" Means that when we do a statistical test we are willing to accept that .05 (=5%) of the time, or 1 in 20, we will make the mistake of rejecting our null hypothesis when it is true. For this problem, we would conclude that wealthy consumers responded ...

Solution Summary

The solution discusses the fact that you are a brand manager and have been running general TV spots to market your product. Now, you are considering running a series of spots that specifically targets wealthy consumers. The spots will cost $2K out of your $100K advertising budget. You estimate the market potential for wealthy consumers to be $250K. You hire a marketing research firm to conduct a survey that will help you determine if wealthy consumers will respond more favorably to the spots targeted towards them than the general spots. The researcher suggests you "use an alpha level = .05."

Explain in managerial terms what is meant by "use an alpha level = .05." Do you agree with her suggestion? If so, explain why. If not, explain why and indicate the alpha level you would use instead.

After conducting the research, the researcher reports that wealthy consumers did in fact respond more favorably to the spots targeted towards them than the general spots (p = .12). Explain in managerial terms what is meant by p = .12. Given your answer to question 1a, what managerial action would you undertake?

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