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    Hypothesis Testing

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    You are a brand manager and have been running TV ads to market your product. However, 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."

    a. 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.

    b.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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    Solution Preview

    a)
    <br>
    <br>This is in fact a hypothesis testing, that is, testing if wealthy consumers will respond more favorably to the spots targeted towards them than the general spots by a survey.
    <br>
    <br>Null Hypothesis H0: wealthy consumers will respond more favorably to the spots targeted towards them than the general spots
    <br>Alternative Hypothesis H1: wealthy consumers will NOT respond more ...

    Solution Summary

    You are a brand manager and have been running TV ads to market your product. However, 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."

    a. 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.

    b.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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