Paid Content – Selim Hasagasioglu

Solution to Management Science Series #213: Real-world example: Marbella Call Center

Marbella Call Center is a contractor assessing the quality of calls to the customer services of top global brands. Recently, Marbella agreed with Eldorado, a global retailer, on assessing the quality of the customer service of Eldorado.

Marbella has been periodically recording a random sample of customer calls to Eldorado. Calls are evaluated on whether the employee taking the call abides by Eldorado’s customer support policies.

Historically, 80% of all calls conformed to the policy. A recent sample of 120 calls found that 70 adhered to the policy.

1. What is the sample proportion?

2. Is the normal distribution a good approximation?

3. What is the expected value and standard deviation of the sample proportion?

4. What is the probability of getting 70 or fewer calls that adhered to the company policy?

5. Do you see any problems concerning the adherence to the company’s customer support policies?

On Scaling Service Businesses and Digitization 💻

“Many businesses gain only limited advantages as they grow to large scale.
Service businesses especially are difficult to make monopolies.
If you own a yoga studio, for example, you’ll only be able to serve a certain number of customers.
You can hire more instructors and expand to more locations, but your margins will remain fairly low and you’ll never reach a point where a core group of talented people can provide something of value to millions of separate clients, as software engineers are able to do.”
➡️ Taken from Peter Thiel’s Zero to One
In this article, I try to disprove Thiel’s claim, providing a number of companies that are services businesses and have scaled through digitization successfully let alone have become monopolies despite inherently being service businesses. I elaborate on how these companies reinvented their business models and became successful while also sharing what they could have done better and some potential risks looming large in the future. I also demonstrate how these exceptional companies destroyed established trends and biases.

Solution to Management Science Series #212: Real-world example: Determining Portfolio Returns

An ETF created by the investment management firm, Gold Returns (GR) has a normally distributed expected monthly return with μ = 2% and σ = 8%.

a)What is the probability that the return is positive next month?

b)What is the probability that the portfolio’s return exceeds 10%?

c)What is the median return?

d)What is the first quartile of return?

Solution to Management Science Series #211: Real-world example: Kabuto Drinks forecasting production capacity and launching a loyalty program

A soft-drink company called Kabuto plans to model the production capacity for the year 2026.

The forecasters determined that the annual soft-drink consumption with the respect to Kabuto’s brands is normally distributed with a mean of 160 liters per customer of Kabuto per year and a standard deviation of 40 liters per customer per year.

a)What is the median per person annual consumption?

b)What is the mode for the per person annual consumption?

c)What percentage of Kabuto consumers do consume more than 160 liters per year?

d)What percentage of Kabuto consumers do consume more than 200 liters per year?

e)What percentage of Kabuto consumers do consume more than 230 liters per year?

f)What percentage of Kabuto consumers do consume fewer than 120 liters per year?

g)Your marketing department is proposing a loyalty program for the consumers who lie within the top 5% of Kabuto-branded soft-drink consumption. Find the threshold value of annual Kabuto drink consumption for these top consumers in liters.

h)In an alternative scenario, Kabuto will have customers within the top 3% of consumption join the loyalty program. Find the threshold value of annual Kabuto drink consumption for these top consumers in liters.

Career Advice 💡Focusing the numbers that do not add up 🧮

An on-campus recruiter came to your school and presented a slide deck showing some detailed metrics of the company.

You saw the revenues, profits, growth rates, and many other important financial metrics. Of course, such information is important for all prospective employees while they are trying to make a sound decision.

Then, you saw the slide, which was about the growth of the company in terms of headcount. The company had a cumulative annual growth rate of 25% for the last decade with respect to its net headcount growth.

What can you do to check whether this number is true?

You checked the company’s total headcount 10 years ago and found out that there were 500,000 employees working at the company at that time.

So, currently there should have been 3,725,290 employees now working at the company, which is more than the total population of your country!

If this trend were to continue for the next 44 years (which is of course very unlikely), almost every living human on earth would be working at this company.

This is an exaggerated story but I have witnessed similar stories in such company presentations.

TL;DR
Being on the lookout of such illogical trickery regarding numbers will serve you well in your career.
In this article, I will expand on the tactics used by some of the ‘prominent’ companies to lure you into their companies and what you need to do to prevent this from happening to you. They might be more desperate than you think. I also recommend a few books that unveil ‘the glamor’ of these companies and reveal the façade.

Solution to Management Science Series #210: Real-world example: Famous hotel chain, Mushroom Kingdom, bent on improving customer satisfaction

Real-world example: Famous hotel chain, Mushroom Kingdom, bent on improving customer satisfaction

You are the owner of the famous hotel chains called Mushroom Kingdom (MK). Historically, 75% of all the customers claimed that they were ‘completely satisfied’ with the services and accommodation offered by the MK.

You hired an analytics company, named Gotham Analytics (GA), that would conduct analyses to determine whether this still holds true. GA conducted a survey, by randomly sampling 35 customers out of a total of chain’s 250 customers. The number of customers in the sample who claimed that they were ‘completely satisfied’ is 25.

1) Calculate the sample proportion.

2) Could you assume that the distribution of the sample proportion is normal?

3) What is the standard deviation of the sample proportion using the finite population correction factor?

4) What is the standard deviation of the sample proportion ignoring the finite population correction factor?

5) Recalculate 3) and 4) assuming the chain has 110 customers.

6) Recalculate 3) and 4) assuming the chain has 1500 customers.

7) Assume again that the firm has 250 customers. Using the finite population correction factor to calculate the standard deviation of the sample proportion, what is the likelihood of finding 25 or fewer “completely satisfied” customers in a sample of 35 customers?

The Value of Your Customers to Your Firm

The Value of Your Customers to Your Firm
Your company has only two types of customers. Segment 1 consists of customers who purchase less in absolute dollars. However, the retention rate of this segment is high.
Segment 2 consists of customers who purchase more in absolute dollars compared to the purchasing level of segment 1. However, these customers churn at higher rates.
Both segments have identical acquisition costs.
Which segment should your company target?
Impossible to answer! That is why for your marketing efforts to work efficiently, you need a quantitative and data-driven approach even though some inputs are prone to assumptions.
In this text, I will demonstrate why this question cannot be answered easily even if you have all the data measured and ready to be tinkered with. I will also provide some contingency scenarios in which both segments can be very significant or less significant to your firm.

Do not ever skip your science class 🥼 Remembering Late Great Edward Osborne Wilson: “The Father of Sociobiology” and “The Father of Biodiversity” 🔬

Do not ever skip your science class 🥼

Remembering Late Great Edward Osborne Wilson: “The Father of Sociobiology” and “The Father of Biodiversity” 🔬

⬇️

“…Equally impressive, honeybees and some species of ants can remember the location of up to five places where food is found and the time of day at each when food is available.

How can an insect process so much information with a brain not much larger than the period below the question mark at the end of this sentence?

The principal reason is the way the insect brain much more efficient by unit volume—is constructed.

Glial cells, which support and protect the brain cells of larger animals, including us, are omitted in the insects, allowing more brain cells to be packed into the same space.

Also, each insect brain cell has many more connections on average to other cells than do those of vertebrates, allowing added communication by means of fewer information distribution centers.”

In this article, I review Edward Osborne Wilson’s great book ‘Letters to a Young Scientist’. The book is a gem not only to understand Edward Wilson’s scientific journey but also to learn how to carve one’s own path in science and academia.

Solution to Management Science Series #209: Mysterious Disease in a Tropical Island: Data Analytics & Medicine

Mysterious Disease in a Tropical Island: Data Analytics & Medicine

23% of males in the tropical island, Cappytopa, are known to carry a mysterious disease called ‘Dinosaur flu’.

A newly developed test correctly detects dinosaur flu 90% of the time for males, but incorrectly detects dinosaur flu in non-infected males 35% of the time (false positive).

1.A randomly selected male is tested for the dinosaur flu and the result is positive. What is the probability that this male is dinosaur flu positive?

2.What is the probability that this same male is dinosaur flu negative?

3.What is the probability that a randomly selected male has a positive test? Would you trust in this test?

Solution to Management Science Series #208: Zodd Japanese Manga trying to improve customer satisfaction

Selim Hasagasioglu Academy and Consulting Services was contacted by a very niche e-commerce platform called Zodd that markets and sells Japanese manga and relevant merchandise.

Zodd has been recently struggling with customer satisfaction issues. Furthermore, Zodd does not have the information on the historical customer satisfaction levels.

Selim’s firm carried out a survey, randomly sampling 50 customers out of the firm’s 1300 customers. The number of customers in the sample who claimed that they were ‘entirely satisfied’ was 35.

a) Do you need to use the finite population correction factor?

b) What is the sample proportion for the sample collected by Selim’s firm?

c)Is the distribution of the sample proportion normal or can it be used to conduct a confidence interval analysis?

d) What is the margin of error assuming a 95% confidence level?

e) What is the 95% confidence interval for the proportion of customers who are “entirely satisfied”? What is the 99% confidence interval? Are you 95% confident that customers are more than likely to be entirely satisfied with Zodd? Are you 99% confident that customers are more than likely to be entirely satisfied with Zodd?

f) How many customers should be sampled to ensure a margin of error of 0.12 with a 90% confidence level if you use p* = 0.5?

g) How many customers should be sampled to ensure a margin of error of 0.12 with a 90% confidence level if you use p* = 0.75?

h) Between the answers to f) and g), which is a more conservative approach and why is this difference important in the practice of data/business analytics?