Reference no: EM131689525

Question: You work in the corporate office for a nationwide convenience store franchise that operates nearly 10,000 stores. The per-store daily customer count has been steady at 900 for some time (that is, the mean number of customers in a store in one day is 900). To increase the customer count, the franchise is considering cutting coffee prices by approximately half. The 12-ounce size will now be $.59 instead of $.99, and the 16-ounce size will be $.69 instead of $1.19. Even with this reduction in price, the franchise will have a 40% gross margin on coffee. To test the new initiative, the franchise has reduced coffee prices in a sample of 34 stores, where customer counts have been running almost exactly at the national average of 900. After four weeks, the sample stores stabilize at a mean customer count of 974 and a standard deviation of 96. This increase seems like a substantial amount to you, but it also seems like a pretty small sample. Is there some way to get a feel for what the mean per-store count in all the stores will be if you cut coffee prices nationwide? Do you think reducing coffee prices is a good strategy for increasing the mean customer count?