Modern Database Management: Chapter 11 Problem and Exercise 15

Question

The mail-order firm described in Problem and Exercise 13 has about 1 million customers. The firm is planning a mass mailing of its spring sales catalog to all of its customers. The unit cost of the mailing (postage and catalog) is $6.00. The error rate in the database (duplicate records, erroneous addresses, etc.) is estimated to be 12 percent. Calculate the expected loss of this mailing due to poor-quality data.

Answer

The number of customers for mail-order firm is 1 million (1,000, 000)
The unit cost of mailing a catalog + postage is $6.

The error rate in the database is 12%.

So, the expected loss of mailing due to poor quality is given by

= number of customers x error rate x unit cost
= 1,000,000 x 0.12 x 6
= 720,000

Hence, the expected loss would be $720,000.