Question

This Question has 6 parts a) to f): Answer all of them below:

Penn State Marketing and Branding Office is interested in understanding more about alumni’s donation behavior, and the director Tom invited you to analyze a data set of 1,000 donors in the year 2016. There are several variables in the data

Y_i Amount of donations in dollars donor i made in the year 2016.

MC_i: The cost of all marketing communications in dollars donor i received in the year 2016.

R_i: How recent (in years) has donor i made a donation? e.g. RC_i = 5 means donor i’s last donation is five years ago (Recency).

F_i: How frequently does donor i make donations in the past 10 years? e.g. FQ_i = 0.5 means donor i makes five donations in the past 10 years.

M_i: How much donations ($) does donor i make on average in the past 10 years?

Tom built the following regression model

Y_i=β_0+β_1 MC_i+β_2 R_i+β_3 F_i+β_4 M_i+ϵ_i,

and Table below summarizes the estimated regression model from SPSS,

a) What does the coefficient estimate 1.702 mean (in the MC row)?

b) Based on the output, is the impact of marketing communications statistically significant?

Tom added a new variable “State_i” into the regression model

Y_i=β_0+β_1 MC_i+β_2 R_i+β_3 F_i+β_4 M_i+β_5 State_i+ϵ_i,

and Table below summarizes the estimated regression model from SPSS. State_i = 1 when the donor is from Pennsylvania and State_i = 0 when the donor is not from Pennsylvania.

c) What does the coefficient estimate -11.636 mean (in the State row)?

d) Tom said

“Since Penn State is located in Pennsylvania, we should spend more resources targeting those donors who are from Pennsylvania.”

Do you agree or disagree with Tom’s decision? Use evidence from the output to support your claim.

Tom added a variable “GradYear_i” into the regression model

Y_i=β_0+β_1 MC_i+β_2 R_i+β_3 F_i+β_4 M_i+β_5 State_i+β_6 GradYear_(1999_i )+β_7 GradYear_20〖00〗_i+ϵ_i

and Table below summarizes the estimated regression model from SPSS. Here, all donors graduated either from year 1998, 1999 or 2000 and GradYear 1998 is used as the baseline.

e) What does the coefficient estimate -13.862 mean (in the GradYear_1999 row)?

f) What does the coefficient estimate 19.433 mean? (in the Constant row)

Answer 1

Solution: