Alex Hamilton founded Hamilton Marketing Services in 1999 after leaving a major marketing consulting firm in Chicago. Hamilton Marketing Services focuses on small- to medium-sized retail firms and has been quite successful in providing a wide range of marketing and advertising services. A few weeks ago, a relatively new customer that Alex himself has been working with for the past several months called with an idea. This customer, a pet-grooming company, is interested in changing the way it prices its full-service dog-grooming service. The customer is considering two options: (1) a flat $40.00 per visit price and (2) a $30.00 per visit price if the dog owner signs up for a series of four groomings. However, the pet-grooming service is unsure how these options would be received by its customers. The owner was hoping there was some type of study Alex could have his company do that would provide information on what the differ- ence in response rate would be for the two pricing options. He was interested in determining if one option would bring in more rev- enue than the other. At the time, Alex suggested that a flier with an attached coupon be sent to a random sample of potential customers. One sample of customers would receive the coupon listing the $40.00 price. A second sample of customers would receive the coupon listing the $30.00 price and the requirement for signing up for a series of four visits. Each coupon would have an expiration date of one month from the date of issue. Then the pet-grooming store owner could track the responses to these coupon offers and bring the data back to Alex for analysis. Yesterday, the pet store owner e-mailed an Excel file called Grooming Price Test to Alex. Alex has now asked you to assist with the analysis. He has mentioned using a 95% confidence inter- val and wants a short report describing the data and summarizing which pricing strategy is preferred both from a proportion- response standpoint and from a revenue-producing standpoint.

Data:

Required Tasks:

1. Compute a sample proportion for the responses for the two coupon options under consideration.

2. Develop a 95% confidence interval for the difference between the proportions of responses between the two options.

3. Use the confidence interval developed in (2) to draw a conclusion regarding whether or not there is any statistical evidence that there is a difference in response rate between the two coupon options.

4. Determine whether or not there is a difference between the two coupon options in terms of revenue generated.

5. Identify any other issues or factors that should be considered in deciding which coupon option to use.

6. Develop a short report summarizing your analysis and conclusions.