MSIN0041 Marketing Science

Online Controlled Examination Paper

2023/24

Copyright Note to students: Copyright of this assessment brief is with UCL and the module leader(s).  If this brief draws upon work by third parties (e.g. Case Study publishers) such third parties also hold copyright. It must not be copied, reproduced, transferred, distributed, leased, licensed or shared with any other individual(s) and/or organisations, including web-based organisations, without permission of the copyright holder(s) at any point in time.

Academic Misconduct: Academic Misconduct is defined as any action or attempted action that may result in a student obtaining an unfair academic advantage. Academic misconduct includes plagiarism, obtaining help from/sharing work with others be they individuals and/or organisations or any other form. of cheating. Definitions and penalties for Academic Misconduct are outlined in the Academic Manual.

•     It is forbidden to:

o  Communicate or collaborate with other students or any other third parties in relation to this assessment.

o  Discuss or share assessment content with other students or third parties.

o  Copy or attempt to copy the work of another student(s).

• Such actions will be referred to the Academic Misconduct Panel, the penalties of which may include exclusion from UCL.

Referencing: In an exam no external research would normally take place and you would demonstrate your learning from the module and communicate your learning in your own words and, where appropriate, through calculations. This applies to this online assessment. If you were to make direct use of somebody else’s work, including making direct use of information generated by an artificial intelligent (AI) tool, either by memorising it or copying it word for word, you must reference and provide full citation for ALL sources used.  This includes any direct quotes and paraphrased text.  If in doubt, reference it. Further guidance on referencing is to be found here: https://library-guides.ucl.ac.uk/referencing-plagiarism Failure to cite references correctly may result in your work being referred to the Academic Misconduct Panel.

Use of Artificial Intelligence (AI) Tools in your Assessment: Your module leader will explain to you if and how AI tools can be used to support your assessments. In some assessments, the use of generative AI is not permitted at all. In others, AI may be used in an assistive role which means students are permitted to use AI tools to support the development of specific skills required for the assessment as specified by the module leader. In others, the use of AI tools may be an integral component of the assessment; in these cases the assessment will provide an opportunity to demonstrate effective and responsible use of AI. See the introductory table on pages 2 and 3 of this brief to check which category use of AI falls into for this assessment. Students should refer to the UCL guidance on acknowledging use of AI and referencing AI. Failure to correctly reference use of AI in assessments may result in students being reported via the Academic Misconduct procedure. Refer to the section of the UCL Assessment success guide on Engaging with AI in your education and assessment.

IMPORTANT:

Write the question number and your chosen response on your exam answer document. There are FIVE (5) compulsory questions in total. Each question is worth TWENTY (20) marks. Candidates should attempt all questions. Please keep your answers concise by keeping your answers at most 250–300 words per question, and often significantly less than the limit.

Question 1

Explain in words why two firms that produce a homogenous product at the same unit cost end up selling at the unit cost in Bertrand competition. Provide two ways/reasoning the Bertrand outcome can be avoided. Remember to explain each reasoning with real-world examples. [20 MARKS]

Question 2

Uniqlo would like to determine who among its customer base should receive a 10%- off coupon. Recommend a data-driven approach to this question. In doing so, make sure that you identify both the type of data and the statistical methods used, as well  as how the data analysis would identify the right customers to target. [20 MARKS]

Question 3

List one advantage and disadvantage of A/B testing. For the disadvantage you list, show its practical relevance by giving a marketing question/scenario with actual firm/industry where the use of A/B testing is not ideal. [20 MARKS]

Question 4

There is a local gym charging a monthly membership fee of £30. The gym hired a marketing consultant to help it make more informed strategic decisions about its customers. Through customer survey, the consultant reported that there are segments that make up the gym’s customer base: casual goers and enthusiasts. The consultant estimated that enthusiasts made up around 30% of the customer base, whereas casual goers made up the remaining 70%.

Through a longitudinal analysis on a sample of customers, it was found that, on average, an enthusiast member renewed the subscription with probability 80%,  whereas a casual goer member renewed the subscriptions with probability 50%.

Suppose the membership is pre-paid, that is, a gym goer needs to pay the (non-refundable) membership fee at the beginning of each month of membership. Assume the cost of acquiring a new customer is £65, which is incurred through marketing expense such as targeted advertising. Assuming the gym has a required return of 20%, can the gym afford its current customer acquisition strategy? You may find the following mathematical fact covered in the lectures useful: for r > 0.

Without any calculations, do you expected any temporal trend in the aggregate monthly retention of a cohort of customers acquired at the same time? [20 MARKS]

Question 5

Suppose you are a cereal product manufacturer that sells your products through partnered supermarkets all over the country. Each week, you are given the volume data, which include weekly transacted quantities and average prices from each supermarket. You wish to understand the price elasticity of demand by running the following regression with your volume data:

log Priceit  = α + βQuantityit  + ϵit,

where i is the index for supermarket and t  is the index for weeks. Assume you obtain an estimate of β  = −0.5. Explain why the estimate must be wrong. Provide one reason why it could go wrong. Propose one solution to correct your estimate based on the one possible reason you identified. [20 MARKS]