Joe Barton, sales manager of the life insurance division of Liberty Hill Insur-
ID: 3351656 • Letter: J
Question
Joe Barton, sales manager of the life insurance division of Liberty Hill Insur- ance Corporation, was hoping to provide additional guidelines for isolating prospective customers tor his sales force. One approach that he considered was to find the average amount of insurance that individuals with certain charac- teristics had. Then, any individual that had the same characteristics and less than the average amount of insurance could be considered a prime prospect. Barton decided to implement this line of reasoning. He began by drawing a random sample of 20 policyholders from the firm's files. He started his analysis by focusing on income and family size. The relevant information taken from the files is presented below a. How wouid you analyze these data to isolate prospective consumers? b. Which family or families appear to represent good prospects? Amount of Life Insurance Incorne Family n Thousands of Dollars)n Thousands of Dollars) Size 14 27 10 10 35 10 17 14 16 18 19 20 13 14Explanation / Answer
Cross Classificstion
As a first step, we classify the families with respect to income and family size and record the insurance amount in each income-family size class.
Income ranges from 6 to 19 which we divide into 3 classes: (6 - 10), (11 - 15), (16 - 20).
Family size ranges from 2 to 7 which we divide into 3 classes: (2, 3), (4, 5), (6, 7).
Based on this classification, the insurance amount in each class and average of those amounts (given in brackets) are shown in the following table:
The insurance amount which is/are less than the class average is/are underlined.
Income
Family
Size
(‘000$)
2, 3
4, 5
6, 7
6 - 10
14, 15, 20, 22, 23, 24 (19.67)
25 (25)
-
11 - 15
29, 30, 32 (30.33)
24, 25, 27, 31 (26.75)
30, 35 (32.5)
16 - 20
39, 40, 44 (41)
48 (48)
-
Thus, going by the criterion given in question, the 9 families with the following serial numbers as given in the question, appear good prospects:
1, 8, 9, 10, 13, 14, 16, 17, 18 ANSWER
Income
Family
Size
(‘000$)
2, 3
4, 5
6, 7
6 - 10
14, 15, 20, 22, 23, 24 (19.67)
25 (25)
-
11 - 15
29, 30, 32 (30.33)
24, 25, 27, 31 (26.75)
30, 35 (32.5)
16 - 20
39, 40, 44 (41)
48 (48)
-
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