Predictive Analysis for Data-driven Decisions

 

 

 

Determine business outcomes using predictive analysis techniques.

 

Student Success Criteria
View the grading rubric for this deliverable by selecting the “This item is graded with a rubric” link, which is located in the Details & Information pane.

 

Scenario
You are the manager for a company that sells outdoor grills. You’ve recently earned your MBA, and you want to apply what you’ve learned to your position to help with decision-making. You have developed the following estimated regression equation to help make data-driven decisions for the store. This will help you to better see how the unemployment rate, temperature, gas prices, and the price of steak impact weekly outdoor grill sales.

 

Y = 22,100 – 412×1 + 818×2 – 93×3 – 71×4

 

Where:

· Y = weekly sales

· x1 = local unemployment rate

· x2 = weekly average high temperature

· x3 = number of activities in the local community

· x4 = average price of gasoline per gallon

 

Instructions
Use the above equation and information to answer the following questions in a Word document, and create a guideline to use for future business decisions:

 

Based on the equation above, please provide the value for x1, x2, x3, and x4. Also, explain what these values mean in the context of this question. For example: What does the value of 818 mean in the equation above (specify if it is x1 or x2 or x3 or x4, and explain what those values mean based on the equation and context)?
What are the estimated weekly sales if the unemployment rate is 3.7%, the average high temperature is 670, there are 10 activities, and the average price of gasoline is $3.39 per gallon?
Evaluate data mining techniques that could be used to enhance manager’s decision-making to increase sales.
What recommendations or decisions could you make based on the predictive analysis in question 2?

 

 

 

Sample Solution

  • x1: Local unemployment rate. A higher unemployment rate is associated with lower sales of outdoor grills, as people are less likely to have disposable income to spend on luxury items.
  • x2: Weekly average high temperature. A higher average high temperature is associated with higher sales of outdoor grills, as people are more likely to be grilling outdoors in warmer weather.
  • x3: Number of activities in the local community. A higher number of activities in the local community is associated with lower sales of outdoor grills, as people are more likely to be spending their time participating in other activities rather than grilling.
  • x4: Average price of gasoline per gallon. A higher average price of gasoline is associated with lower sales of outdoor grills, as people are less likely to be grilling if they are paying more for gasoline.

The value of 818 in the equation represents the coefficient for x2, the weekly average high temperature. This means that for every 1 degree increase in the average high temperature, sales of outdoor grills are expected to increase by 818 units.

2. What are the estimated weekly sales if the unemployment rate is 3.7%, the average high temperature is 670, there are 10 activities, and the average price of gasoline is $3.39 per gallon?

To answer this question, we can simply plug these values into the equation:

Y = 22,100 - 412(3.7) + 818(670) - 93(10) - 71(3.39)
Y = 19,595

Therefore, the estimated weekly sales if the unemployment rate is 3.7%, the average high temperature is 670, there are 10 activities, and the average price of gasoline is $3.39 per gallon is 19,595 units.

3. Evaluate data mining techniques that could be used to enhance manager’s decision-making to increase sales.

There are a number of data mining techniques that could be used to enhance the manager’s decision-making to increase sales. These techniques include:

  • Regression analysis: This technique can be used to identify the factors that are most likely to affect sales. This information can then be used to develop strategies to increase sales.
  • Cluster analysis: This technique can be used to identify groups of customers who are similar in terms of their buying behavior. This information can then be used to target marketing campaigns to these specific groups of customers.
  • Decision trees: This technique can be used to develop rules that can be used to predict sales. These rules can then be used to make decisions about pricing, promotions, and other marketing activities.

4. What recommendations or decisions could you make based on the predictive analysis in question 2?

Based on the predictive analysis in question 2, I would recommend that the manager focus on increasing the average high temperature and the number of activities in the local community. These factors are both positively correlated with sales of outdoor grills. The manager could also consider lowering the average price of gasoline, but this may not be feasible depending on market conditions.

In addition to these recommendations, the manager could also use the predictive analysis to develop a more targeted marketing campaign. For example, the manager could target customers who live in areas with high unemployment rates or who participate in outdoor activities.

Overall, the predictive analysis provides the manager with valuable information that can be used to make decisions about how to increase sales of outdoor grills.

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