Friday Fun Question

Most Fridays, I usually answer a question or questions from Principles of Marketing students about marketing. This Friday, though, I am breaking from that pattern to answer a question from a Retail Management student. This week’s question: When dealing with competitors or when examining competitors, we talked about any business located near our client as a possible competitor. This view seems too broad because not every business competes against our client. How do you know who your competitors are?

Several approaches exist to classify or determine your competitors including cluster analysis and multidimensional scaling. The below typology fits well when dealing with service firm such as a food retailer. This website provides additional discussion while this blog post gives an example drawn from higher education. The typology classifies competitors into six forms based on buyer needs and competitors' processes to fill those needs, including:

  1. Direct competitors: Those competitors that fill the same buyer needs you fill in the same way that you fill them;
  2. Alternative use competitors: Those competitors that fill different buyer needs but do so in the same way that you fill your buyers’ needs;
  3. Substitute competitors: Those competitors that fill the same buyer needs you fill but fill them in a different way;
  4. Economic competitors: Those competitors that fill neither the same buyer needs you fill nor use the same ways but do compete for the same buyer budgets;
  5. Complements: Those sellers with which you cooperate to fill buyer needs but then compete for the larger proportion of buyer expenditures;
  6. Buyers: The propensity and ability of buyers to fill their own needs

This classification system should involve over time, consistent with R-A theory. Also, it could be extended to other service providers in the fast casual market, financial services market, or the vending/grocery market.

Friday Fun Question

Most Fridays, I will answer a question or questions from Principles of Marketing students about marketing. This week’s question: Why do gas prices end in a fraction?

Good question with mixed answers. The U.S. Energy Information Association provides no reason for this practice.

The pricing of gasoline and diesel fuel at retail service stations to 9 tenths of a cent is most likely a marketing practice. It is similar to other retail pricing of a product at $19.99 rather than $20. EIA does not have information on the origin of this practice.

This answer struggles to pass the smell test. If this reason existed, then why bother with the fraction. While consumers do round down based on the number to the left of the digit, consumers do not round down (or up) based on the digits to the right of the decimal point. That is, consumers will perceived the price of a widget at $7 regardless if the price per unit is $7.99 or $7.19.

Marketplace provides a response that passes the smell test. The answer lies in federal, state, and local tax rates at a time when the price for a gallon of gasoline was pennies.

We have to go way back to when the oil companies were selling gas for, let’s say, 15 cents, and then the state and federal boards decided they wanted a piece of that to keep the roads going, so they added 3/10 of a cent. And the oil companies said, ‘Well, we’re not going to eat that,’ so they passed that on to the public.

This response seems more likely because rates for electricity, water, and/or sewage are often calculated to the second or third decimal place.

The tax man collects his by the fraction.

Friday Fun Question

Most Fridays, I will answer a question or questions from Principles of Marketing students about marketing. This week’s question: With so many women playing golf, how come equipment manufacturers do not produce more items for women?

To answer this question, I turned it over to two Otterbein alumni who completed Principles of Marketing, and now work in the golf industry.

Alexandria Pulos, Greg Norman Champions Golf Academy

More women are starting to play golf. However, it has been shown that most men start golf at a younger age than women. It seems that men grow with the industry as new innovations are introduced and club technology improve. Whereas the average female golfer has not started as young, but also doesn't have as high of a turnover rate for purchasing new clubs, apparel, etc.

In my opinion, the industry does not realize that there is another factor that should be considered when going to production. A different dynamic exists between a father/daughter as compared to a father/son when it comes to golf and tournament play. I think the industry needs to consider the "golf relationship" so to speak that each has. From both the international and domestic tournaments/golf events that I have attended, I notice that fathers are much quicker to jump on opportunities, and new apparel and merchandise for their daughters than they are to their sons. I am not sure why this happens. I get a significant number of female inquiries for training at our facility, almost equivalent to that of men.

As the golf industry progresses, I think they will see that more fathers are realizing that there are around 1800 unused women golf scholarships every year. In most cases, it is easier for women to get golf scholarships to American universities than for men. That said, this drives more fathers to seek the best opportunities they can in merchandise, apparel, and training for their daughters.

Also, men and women have different strengths and weaknesses on the golf course. For example, when I was in Thailand, I went to a very large mall with a primary focus on selling golf related items. Everything from apparel, shoes, golf clubs. etc. they had for sale. Due to the fact that women are better in the short game area, I noticed that they had a wider selection of short game clubs, putters, etc. than for men. The men had a wider selection of drivers, fairway woods, and irons. Just something to think about in relation to the amount of sales and how they differ internationally.

Brock Neighbor, Titleist

According to the National Golf Foundation, only 19% of golfers in the United States are women. It's a sport that many businesses have used for entertainment purposes for the last 50 years. Unfortunately, it is a declining industry because of an increasing number of businesses that find it an inefficient use of time and money. The PGA of America started an initiative in 2013 to try to get more women in the game. While weekend rounds have not declined, weekday rounds have. A majority of homemakers are women, so getting more women interested in the sport could ultimately save it.

Titleist as a company has made a huge push in our golf ball marketing to target more women golfers. We see this as a great opportunity to not only gain market share, but grow the game. We will introduce a new commercial in February marketing our new Pro V1 golf ball to not only men, but all genders/skill levels.

So to the root of your question, as of now, men are the dominant buyers in the industry. Hopefully this trend can gradually shift in the other direction.

Both industry members offer views on the golf industry based on segmenting using demographic and behavioral variables.

A Tale of Two Word Videos

For his current effort (editor's note: is album the appropriate word here?), Weird Al Yankovic posted eight videos in eight days. Two of these posts covered word use, but only one seems to have resonated with viewers.

In Word Crimes, which uses Blurred Lines for its notes, Yankovic reviews several grammar mistakes. Stan Carey, among other bloggers, responded with criticisms of the grammar mistakes mentioned in the video. According to YouTube, the Word Crimes video has been seen 12.5 million times.

In Mission Statement, which probably uses a Crosby, Stills, and Nash song for its notes, Yankovic roughly sings a song comprised of nothing more than corporate jargon, clichés, and other nonsense. This song appears far more powerful in pointing out the ever-increasing amount of empty phrases included by, well, nearly everyone. This video, not surprisingly, has garnered only 712,000 views.

At least two explanations could exist for the disparity in views. One, copy editors, journalists, and writers are more likely on Twitter. These people pushed the video on other social media platforms. Nearly two weeks since Word Crimes was posted, the hashtag reached 91,075 unique Twitter accounts. This reach remains impressive. Conversely, Mission Statement lacked an associated hashtag.

Two, most people use at least one of those phrases derided and dismissed in Mission Statement. People, as a general rule, do not appreciate even gently teasing of their integration of corporate speak into general vocabulary.

It is too bad that Mission Statement failed to garner more views because it marks a more creative effort in terms of both words and image.

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Mission Statement video

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Word Crimes video

(Too Early or Too Late) Friday Questions

Usually on Fridays, a question from a Principle of Marketing student gets posted. On Monday, several questions are being answered for either a very early or very late Friday questions.

What is an example of a nice graph to use in our PowerPoint?

Robin Williams includes some examples in her book on layouts for the non-designer. Stephen Few's blog and books also discuss this concept. You should be able to find William's book at the Otterbein library and Few's books through interlibrary loan.

By clicking on the "Samples" link under the "MKTG3100" heading, you will find five reports that serve as good guides for design including tables, and graphs.

I need more Excel knowledge (e.g., step by step, how to run different formulae, etc.).

For step-by-step instructions, there are dozens of videos posted on YouTube. If you search for a topic such as "correlation in Excel," "Poisson distribution in Excel," or "scatter chart in Excel," then you will receive several recommendations. You will need to watch a few to determine the video that best suits your needs.

I want to know how to do correlation metrics in a form of charts and graphs and Excel.

An X-Y scatter plot should provide some insight. Also, you should look at the chandoo Excel blog for instructions, suggestions, and guides on using various pieces of Excel.

When a cluster analysis does not work, is there another effective way to segment the market without an undifferentiated approach?

First, consider theory. How or why would there be a difference in the market? In the Kirin and Dell cases, no one is more likely to drink Kirin or use a Dell than another person based on the given characteristics.

Second, try a different algorithm tool such as factor analysis. This tool follows a similar idea as cluster analysis as you are looking for groups. However, factor analysis explains why a group exists. That is, it provides insight into how groups are unique but necessarily how are groups different.

Third, perform a contingency table with a chi-square test. This approach does not require you to impose a distribution on the data. However, you need to select two or three items at a time. For example, from the Kirin case, we could have created a contingency table using (a) likelihood to purchase an import beer, and (b) prefer a strong taste. The remaining questions would not have been considered.

In MKTG3850, we cover factor analysis and contingency table in greater detail.

Building a Bookie Business

This story examines how two guys built a bookie business. One passage reviews attracting customers. It seems, a bookie business follows the same approach as HBO. The teaser trial quote:

Like a cable company's free-HBO-for-a-year promotion, Luke and Steve knew they'd have to set more gambler-friendly lines at the beginning to hook them in before normalizing everything and raking in the profit.

"We started with like 10 guys and, to be honest, we put ourselves out there the first couple years," (Luke) says. "We would lower lines, we would move lines so that they would be more favorable for them and people would want to bet with us. Like if the Packers were playing the Niners and the Packers were -7.5, for the first couple years we'd make it -6.5. That might not sound like a lot, but it is."

They would also lower the "juice" (also known as "the vig") — the commission a bookie gets for taking a bet — to try to get guys to jump ship. It worked.

From that point, this business relied on referral marketing to expand its customer base.

Friday Fun Question

Most Fridays, I will answer a question or questions from Principles of Marketing students about marketing. This week's question: How do you determine the target market?

Several methods exist to segment a market beyond the simplistic (everyone wants my product) and the gut (young women are very interested in my market offering). More specific methods include using parametric analysis such as regression or ANOVA, and non-parametric analysis such as chi square and Spearman's rank rho. These methods are covered in the Marketing 3850 (Marketing Analytics) course.

Parametric and nonparametric provide critical region where the analysis can decide to reject, or fail to reject the null hypothesis. Typically, the null hypothesis is stated as there is no difference between groups, the means are equal, or the medians are equal depending on the analytical tool.

Beyond those approaches exist cluster analysis and factor analysis. We cover cluster analysis in both Principles of Marketing (MKTG3100) and Marketing Analytics (MKTG3850). The thought is to form groups based on distance, or loss of information, to determine how similar or dissimilar the observations appear. Statsoft provides a longer, more detailed explanation as well as an embedded video.

Similarly, factor analysis relies on the amount of error each group, or factor, shares. Through this approach, the number of observations or variables can be reduced to some type of groups, which allows for classification. We will most likely cover this approach in MKTG3850 for Autumn 2014. This entry from Statsoft provides additional discussion.

Please note that these responses appear brief.

After a segmenting the market, a target market should be selected based on several considerations, including:

  • Size and growth of the market segment;
  • Cost to service the market segment;
  • Firm's ability to meet the demands of that market segment.

That is, the firm should evaluate the attractiveness of each segment before selecting the segment to target.

Friday Fun Question

Most Fridays, I will answer a question or questions from Principles of Marketing students about marketing. This week's question: What is the best way to predict future trends in customer wants and needs? There is no one way or best way to predict. If there were, then I would teach that method or write that formula on the board. Instead, many forecasting techniques exist.

Broadly, regression offers prediction from a statical approach. This technique allows the manager to understand that these independent variables predict a dependent variable. Regression comes in many flavors such as logic, profit, weighted least squares, ordinary least squares, dummy, classification, etc.

Averages offer another approach to forecast. A simple average (i.e., add two numbers and then divide by two) provides some insight. This approach, however, is sensitive to swings in data. A moving average (i.e., add three numbers and then divide by three) does a better job of handling swings in the data. Alternatively, an instantaneous average, or first derivative, could be advantageous when working with a lot of data that appears within a bounded region such as sales volume of milk.

If the data is particularly lumpy such as stock price movement, then a formula that incorporates the log or exponential functional would be necessary.

If the data is distributed in a binary fashion, then a quadratic equation would be required.

Finally, some forecasters develop simulations such as Monte Carlo to predict future trends. These simulations require a lot of data as well as an experienced modeller.

Given the variety of forecasting techniques, you should choose the technique that best fits your data and your managerial objective.

Friday Fun Question

Most Fridays, I will answer a question or questions from Principles of Marketing students about marketing. This week's question: As someone who wants to go into personal finance, how does marketing help me? Several independent personal finance folks exist plus all those folks plying their trade for banks and insurance companies along with the do-it yourself types. Marketing will help you understand why a consumer would choose you and not one of your many competitors.

First, organize your 5 Cs (collaborators, company, competitors, context, and customers). This post could assist with organizing and identifying competitors. As to customers, you should understand their motivation to invest and save.

Second, create your strategy by segmenting customers, select a target customer to devote your resources, and position your personal finance service by a desired set of attributes or values. Cluster analysis will help you identify groups of customers and assist with finding a desirable cluster, or market segment. Multidimensional scaling will provide insight into the attributes that customers could desire by customer. Possible attributes include aggressive, conservative, balance, multiline, comprehensive, etc.

Third, set your tactics. You should decide how much to price your personal finance service, how you are going to communicate those attributes to your target market, how you are going to design a product or products to meet your target market's needs, and where you will offer your service.

Whether you are starting out as a personal finance professional or a seasoned veteran, marketing offers you much to help your practice achieve superior financial performance.

A Dram for Coolest Use of Cluster Analysis

Luba Gloukhov enjoys single malt scotch. While enjoying a sip, Gloukhov wondered if scotch distilleries could be clustered.

Using a dataset and K-means clustering, Gloukhov was able to create groups, or segments, of single malt scotch.

The analysis is well done and well interpreted. It would have been easier if Marketing Engineering had been used.

Hopefully, Gluukhov will inspire other people to explore cluster analysis to form groups that would not otherwise be apparent.

Cluster analysis would provide a better way to organize this bar.