The Null and Alternative Hypothesis for The Piggy Bank Options - Essay Example

The Null and Alternative Hypothesis for The Piggy Bank OptionsHypothesis test are very useful tools that can help break down a problem by creating a claim in the form of null hypothesis and testing whether that claim is true or not. If the null hypotheses can not be proven the hypothesis has an alternative hypothesis which becomes the solution if the claim on the null hypothesis is rejected. There are various variations of hypothesis test such as applications utilizing population mean, proportion or variance.

Piggy Bank currently has a couple of options which the bank needs to choose the optimal choice to implement an incentive for its new credit card product. The choices the bank currently is contemplating are cash back on online purchases or cash back on clothing stores purchases. Online purchasing is a rising trend in the purchasing behavior of the world population since more people are becoming online users. As of 2006 there were over 1.1 billion online users worldwide. In the United States in the fiscal year 2006 the total ecommerce sales were $106 billion, while the US total retail sales were $3,905 (Plunckett Research, 2007).

Online sales to retail sale ratio is 0.027 or 2.7%. This data still does not clear up the purchasing tendencies since the second product offering is sales of clothing. In the same year, 2006, in the United States the overall clothing sales were $214.3 (Plunckett Research, 2007). So far the data provided gives us a better view on how to set up a null hypothesis and alternative hypothesis to create a hypothesis test for the Piggy Bank card incentive problem.A statistician sets up a null hypothesis in order to test a claim.

In reality the statistician knows there is more viable solution than the null hypothesis, thus the goal of the test is to reject the null hypothesis in order to go with the alternative hypothesis solution. The market research data could make a person think that considering that total clothes expenditure in the US is double than the US online sales then the most likely scenario is that it is better to go with the clothing store incentive. This is all the data needed to create a null and alternative hypothesis.

The null and alternative hypothesis for the Piggy Bank options is illustrated below:Null Hypothesis (Ho) – (U1-U2) = 0Alternative Hypothesis (H1) - (U1-U2) < 0In this hypothesis variable U1 = mean purchases online, while variable U2 = mean purchases at retail clothing stores. ReferencesPlunckett Research (2007). Apparel and Textile Industry Statistics. Retrieved November 4, 2007 from Plunckett Research database.Plunckett Research (2007). Ecommerce Industry Statistics. Retrieved November 4, 2007 from Plunckett Research database.