Team Alphabet Soup

Team Alphabet Soup, Information Experts Memo

To: S. McMullen, Production Team Leader, Incentives
Piggy Bank Marketing
From: Team Alphabet Soup, Information Experts

CC: C. No Trump Browne, VP NULL/ALT Hypothesis Department, IE
Link N. Chain, VP Marketing, Piggy Bank
Date: Wednesday, January 31, 2007
Subj: Piggy Bank Credit Card Incentive Plans

Re: Null and Alternate Hypothesis, and Related Reference Documents

Dear S. J. McMullen:
Please direct your attention to the following, and respond at your earliest convenience.

Use team and problem-solving skills to collaborate on a project.
We, in Team Alphabet Soup, have proceeded to collaborate on the project at hand, and have arrived at a starting point. Whether to rebate cash to your depositor’s Credit Card account as Incentive, for Clothing purchase, or for Online Purchase, Team Alphabet Soup has derived the following question:

“Is the customer more often apt to use their Piggy Bank Credit Card in the purchase of an online item, or to purchase an item in a clothing retail store, during the year?”

Formulate Null and Alternate Hypotheses for applications involving a single population mean, proportion, or variance.

Let µON = true mean Online Purchases, and,

µCL = true mean Clothing Stores Purchases.

Null Hypothesis: Ho: µON ≥ µ CL
Alternate Hypothesis: Ha: µON < µCL

Using the referenced data we conclude that the null hypothesis is that the “Online shopping is greater than or equal to the Clothing Store purchases.” Subsequently, our alternate hypothesis, is that the “Online Shopping is less than Clothing Store purchases.” We find that the alternate hypothesis is the burden of proof for the TAS investigation.

STRATEGY

“The ultimate value of a formalized hypothesis is: it forces us to think about
what results we should look for in an experiment. In a formalized hypothesis, a
tentative relationship is stated.” (Class notes; 2006)

Thus: If the alternate hypothesis is accurate, then Piggy Bank should make a decision to use clothing retail as incentive for cash back purchases with their Credit Card.

Refer to the attached tables: the total spending in clothing retail purchases for the year 2004 is $189 billion dollars. Concurrently, the e-commerce, online total retail purchases for 2004, is $71 billion dollars.

As one can see from both other statistical references, online shopping is increasing, at a rate of about 3% per quarter, with sudden bursts in the 4TH Quarters. Online shopping is about 2 to 3% of the total retail picture.

Team Alphabet Soup chose to put as the alternate hypothesis: Online Shopping is less than the Clothing Store purchases.

Next, using statistical analysis, Online Shopping is less than Clothing Store purchases, is the probable result of the final investigation. Team Alphabet Soup will probably find that the alternate hypothesis is not rejected, and reject the null hypothesis.

If Online purchases are less than the Clothing Store purchases, the Production Team at Piggy Bank can gauge their decision to give cash back when the consumer makes a purchase at a clothing store, as inducement to use the Piggy Bank Credit Card, as it will create greater frequency of draws on customers’ accounts.

If you have any questions please call us at Information Experts.

Respectfully yours,
Team Alphabet Soup

Att/notes_references_tables/ Pages 3-8
phd_cc_jg_rc
cc CB, LNC

_____________________________________Links/References/ Tables/ Notes
Ranked by Total Revenue through December 26, 2003
A recent census shows the following for online shopping:
Table 1. Popular Online Shopping Categories 2003 Holiday Projected Online
Category Revenue in Millions Year Over Year Growth
Apparel/Clothing $3,738 40%
Toys/Video games $2,197 33%
Consumer Electronics $2,044 2%
Computer Hardware/Peripherals $1,650 ----*
Video/DVD $1,619 46%
Source: Goldman Sachs, Harris Interactive and Nielsen//Net Ratings eSpending Report, December 2003
Number of respondents = 9,517 online users
*Year-over-year percent growth unavailable for this category due to small sample size in 2002.
“Online retailers have enjoyed a fantastic season in 2003,” said Abha Bhagat, senior analyst
Nielsen//Net Ratings. “This is the third straight season of record growth, which indicates retailers are doing a much better job of appealing to customers through online channels as well as successfully integrating various channels to reach out to customers effectively.” (Nielsen Net ratings, 2004)