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questions # 5 through 9

Part III: Lift and Gains 5. Use the information from the report in question 4 above to create a table showing the lift and cumulative lift for each decile.

6. Create a graph showing the cumulative lift by decile along with a reference line corresponding to ‘no model’.

7. Use the information from the report in question 4 above to create a table showing the gains and cumulative gains for each decile.

8. Create a ‘banana’ chart showing the cumulative gains by decile along with a reference line corresponding to ‘no model’.

Part IV: Profitability Analysis Use the following cost information to assess the profitability of using logistic regression to determine which customers will receive a specific offer: Cost to mail offer to customer: $0.50 Selling price (shipping included): $18.00 Wholesale price paid by BookBinders: $9.00 Shipping costs: $3.00

9. Breakeven for this promotion was 8.3%. What would the gross profit (in dollars, and also as a percentage of gross sales) and the return on marketing expenditures have been if BookBinders had mailed the offer to buy “The Art History of Florence” only to customers with a predicted probability of buying of 8.3% or greater?