Promising Results from a Specialty Catalog Survey
The preliminary survey results just came back on thespecialty catalog project, and they look great! The average planned order size was $42.33, well above the $15
that was hoped for. The group leader will probably bedelighted-after all, $42.33 for each of the 1,300,000 targetaddresses comes out to over $55 million in average sales!
As part of the preparation for the meeting, one of yourresponsibilities is to look through the fine print of how thesurvey was done. The initial memo included few detailsbeyond the $42.33 figure. After some calls, you locate theemployee who did most of the work. Here is what youlearn. A random sample was drawn from a proprietary data-base of 600,000 addresses of well-off people who purchaseluxury items by mail, and 600 catalogs were mailed togetherwith the questionnaire. You also learn that 55 of the 600 surveys were returned. Of these, 13 indicated that"Yes, I willplace an order for items totaling $_________________ before the end of the year."These amounts were $9.97, $12.05,$29.27, $228.26, $6.10, $87.35, $27.48, $8.86, $19.95,$13.29, $44.06, $11.27, and $52.39.
Well, you now know that there is substantial variability inorder size. The 95% confidence interval about the meanextends from $5.82 to $78.84. Multiplying each of theseby the size of the target mailing (1,300,000), you computebounds from $7.6 million to $102.5 million. So even aftertaking randomness into account, it seems to look as thoughthere is real money to be made here. Or is there?
Discussion Questions:
1. Is it proper to multiply the average order size, $42.33, by the number of addresses (1,300,000) in the targetmailing?
2. Is it better, as suggested, to multiply the endpoints of the confidence interval by the target mailing size?
3. Would it be better to multiply by the size of the frameused to select the random sample?
4. Should anything else trouble you about this situation?
5. What is your best estimate, with confidence limits, for potential catalog sales?