Analysis: Commercials at the Royal Theater Ken Chapman, Ph. D. K & C consultants: Complex Solutions to Simple Problems
Jan 17, 2018
Analysis: Commercials at the
Royal TheaterKen Chapman, Ph. D.
K & C consultants: Complex Solutions to Simple Problems
Agenda Legal Issues
Background The Case for Fraud
Measuring Public Opinion Survey Goals Survey Results
Strategy Public Perceptions Possible Strategies Conclusions & Recommendations
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Background Royal Theater Patron (Tommy) Dissatisfied
20 minutes of commercials
Allegation of fraud on Royal Theater’s part
Threatens to file class action lawsuit.
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Presenter: K. Chapman
The Case for Fraud Misrepresentation Vs. Fraud
Prima Facie Case for Fraud A representation was made The representation was false When made, the representation was known to be false The plaintiff relied on the representation The plaintiff REASONABLY relied on the representation The plaintiff suffered damage (economic loss) as a result
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Presenter: K. Chapman
Simple Issues Assertion of Fact
The ticket did mention a 1:00 start time Knowledge of Falsity
The theater knew the movie began at 1:20 Intent to deceive
The theater made money from the ads
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Presenter: K. Chapman
Reliance Actual Reliance
Tommy made sure he was seated by 1 pm
Justifiable (Reasonable) Reliance Starting time specified in:
Newspaper ad Marquee Employee Movie ticket
General public knowledge
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Presenter: K. Chapman
Damage – Economic Loss Damage resulting from reliance:
20 minutes of lost time• Nominal• Punitive Damages
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Presenter: K. Chapman
The Case for Fraud Conclusion:
First four elements easy to establish
Difficulty establishing reasonable reliance and damage
Tommy HAS A WEAK case for fraud.
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Presenter: K. Chapman
Class Action Law Suit To participate, patrons must show
Reasonable Reliance Economic Damages
Conclusion: Most patrons won’t sue
Presenter: K. Chapman
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The Main Issue: Customer Service Tommy’s complaints
He was lied to and forced to watch ads He didn’t like the movie
Customer Service Send the customer away happy
Refund Apology Coupon Outcome: No Lawsuit, No bad word of mouth.
How many patrons resent the ads? Your reputation depends on your patron’s
opinions of this behavior.
Objective – estimate the percentage of all theater patrons resenting commercials.
If less than 10% resent the commercials: Don’t adjust the policy on commercials
If 10% or more resent the commercials: Eliminate the commercials.
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Presenter: K. Chapman
Survey 1 Results 100 responses: 6% resent commercials.
95% confident that between 1.35% and 10.65% of moviegoers resent commercials.
We can’t rule out the possibility that 10% or more of the population resents commercials.
A bigger sample may be desirable
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Presenter: K. Chapman
Survey 2 Results 300 responses: 6% resent commercials
95% confident: The percentage of moviegoers who resent commercials is between 3.31% and 8.69%
Strong evidence that less than 10% resent commercials
Consortium’s rule: Take Tommy to Court
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Presenter: K. Chapman
Advertising & the Seating Period Adjusting the seating period
Eliminating the seating: The bad news Less popcorn sales Seating during the movie
Distinguish between seating time and show time
Eliminate ads & keep the seating period 3.31-8.69% will like eliminating the ads Lost Advertising Revenues Some patrons will miss the ads
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Presenter: K. Chapman
Strategic Issues: The Whole Picture Which customers resent commercials?
Would they pay more for special shows? Can ads be made more entertaining?
Can upset customers be treated differently? A free ticket to a future show might have
prevented a lawsuit
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Presenter: K. Chapman
Recommendations Apologize to Tommy and offer some free
tickets If he wants more, let him go to court.
Improve the accuracy of advertisements Premium shows with fewer ads
Don’t let customers leave angry Training Refund money if customers leave early
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Presenter: K. Chapman
Questions?
Appendix Slides:
16-21: Sampling Error 22-26: Confidence Interval Calculations
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Hypothesis Testing Errors Testing the population proportion:
H0: Settle p > 0.1H1: Go to trial p < 0.1
Risks of Taking Samples
Type I Error – Going to trial when the consortium should try to settle the case.
Type II Error – Avoiding going to trial by negotiating a settlement when the consortium should actually fight the case in court.
Larger survey sample sizes reduce the probability of both types of error.
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Estimating Confidence Interval for Population Proportion
point estimate + margin of error
.)ˆ1)(ˆ(ˆ 2/ nppzp a
Factors Effecting Sampling Error the sample size the level of confidence the estimated percentage of patrons who
resent the ads.
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Sample Size and Confidence Level The larger the sampling size, the smaller
the error. The greater the level of confidence, the
larger the sampling error that must be tolerated.
With a fixed sample size, an increase in the level of confidence will increase the width of the interval. The wider the interval, the less precise is our estimate.
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Sample Proportion The further away the estimated percentage is
from 50%, the smaller the sampling error. The sampling error is maximized when the
estimated percentage who resent the ads is 50%.
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The 95% Confidence Interval
6
ads of showing resent the whosample in the patrons ofnumber x
100 size sample
x
n
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Sample Proportion and 95% z
1.96
on)distributi normal standard of percentile(97.5th on distributi normal
standard theof each tailin .025 of area off cuts that table)normal (from value
.06
adsresent whosamplein patrons of proportionˆ
`025.
zz
nxp
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Confidence Interval Calculation
.)ˆ1)(ˆ(ˆ 2/ nppzp a
.1065.0,0135.0
0465.06.
)0237(.96.106.
100)94)(.06(.96.106.
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Confidence Interval Calculation
Interval is 1.35% - 10.65%. With 95% confidence, the proportion of all
movie patrons who resent commercials is between 1.35% and 10.65%.
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