# 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 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?

##### 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 ...

###### Education

- BSc , Wuhan Univ. China
- MA, Shandong Univ.

###### Recent Feedback

- "Your solution, looks excellent. I recognize things from previous chapters. I have seen the standard deviation formula you used to get 5.154. I do understand the Central Limit Theorem needs the sample size (n) to be greater than 30, we have 100. I do understand the sample mean(s) of the population will follow a normal distribution, and that CLT states the sample mean of population is the population (mean), we have 143.74. But when and WHY do we use the standard deviation formula where you got 5.154. WHEN & Why use standard deviation of the sample mean. I don't understand, why don't we simply use the "100" I understand that standard deviation is the square root of variance. I do understand that the variance is the square of the differences of each sample data value minus the mean. But somehow, why not use 100, why use standard deviation of sample mean? Please help explain."
- "excellent work"
- "Thank you so much for all of your help!!! I will be posting another assignment. Please let me know (once posted), if the credits I'm offering is enough or you ! Thanks again!"
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- "Thank you very much for your valuable time and assistance!"

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