marketing strategy – Selim Hasagasioglu

Solution to Management Science Series #218: Real world example: Interactive Investors Asset Trading Platform

Interactive Investors Asset Trading Platform

Interactive Investors is a well-known asset trading platform used by the citizens of Eldorado. The company plans to improve the platform by adding a feature that would expedite the transaction times.

The company randomly sampled 64 trades and had the new improved platform used for all these transactions. The average transaction time is found to be 25 milliseconds with a standard deviation of 4 milliseconds.

1. Establish the null and alternative hypotheses if Interactive Investors wants to prove whether the average transaction time is different from 28 milliseconds (the average transaction time prior to the change)?

2. Establish the null and alternative hypotheses if Interactive Investors wants to demonstrate whether the average transaction time is less than 28 milliseconds.

3. What should Interactive Investors do if it were to use a level of significance (α) of 0.01 in question 1.

4. What should Interactive Investors do if it were to use a level of significance (α) of 0.01 in question 2.

5. Determine the critical values of the sample mean both of which will cause the alternative hypothesis to be accepted in 1. Use a level of significance (α) of 0.01.

6. Determine the critical value of the sample mean which will cause the alternative hypothesis to be accepted in 2. Use a level of significance (α) of 0.01.

7. How could Type I and Type II errors happen in the context of this problem?

Solution to Management Science Series #217: Real world example: Mushroom Kingdom Social Network

Serra, a video game and console collector, plans to launch a digital forum, which would resemble a social network only for people who collect video games and consoles.

She wants to name it ‘Mushroom Kingdom Social Network’. Albeit optimistic about the prospects of this new venture, Serra still wants to test whether it is a viable business proposition.

So, she randomly samples 50 collectors and asks them how much time each day they would spend on such a social network. The average value measured through this sample is 53 minutes and the standard deviation is calculated as 23 minutes.

a) State the null and alternative hypotheses if Serra wants to demonstrate whether the amount of time spent on this platform is different from 45 minutes per day.

b) Construct the null and alternative hypotheses if Serra wants to test whether the average amount of time spent on the proposed network is more than 45 minutes per day.

c)What should Serra do if she tests the hypotheses laid out in a), requiring a level of significance of 0.05?

d)What should Serra do if she tests the hypotheses laid out in b), requiring a level of significance of 0.05?

e) Which pair of hypotheses are more conservative, a) or b)?

Now, Serra decides to sample only 40 people randomly.

f)What should Serra do if she tests the hypotheses laid out in a), requiring a level of significance of 0.05?

g)What should Serra do if she tests the hypotheses laid out in b), requiring a level of significance of 0.05?

Solution to Management Science Series #216: Should Condor launch a new website?

An online video games store named ‘Condor’ needs to test its old and new web designs. Condor randomly redirects a sample of customers to either site and measures the sales information of customers who purchase.

Condor will launch the new website only if it is 90% confident that the new site generates more sales per transaction (i.e. average transaction amount) than the old website.

Below are shared the data for the sample of customer transaction amounts from the new site and that from the old site.

a) Could you make an educated guess on what Condor should do without calculating anything?

b) Design a hypothesis test and determine whether Condor should roll out the new website.

c) Solve the same problem by using Excel.

The Value of Your Customers to Your Firm

The Value of Your Customers to Your Firm
Your company has only two types of customers. Segment 1 consists of customers who purchase less in absolute dollars. However, the retention rate of this segment is high.
Segment 2 consists of customers who purchase more in absolute dollars compared to the purchasing level of segment 1. However, these customers churn at higher rates.
Both segments have identical acquisition costs.
Which segment should your company target?
Impossible to answer! That is why for your marketing efforts to work efficiently, you need a quantitative and data-driven approach even though some inputs are prone to assumptions.
In this text, I will demonstrate why this question cannot be answered easily even if you have all the data measured and ready to be tinkered with. I will also provide some contingency scenarios in which both segments can be very significant or less significant to your firm.

Solution to Management Science Series #198: Using K-Means Clustering for Customer Segmentation

Using K-Means Clustering for Customer Segmentation
Even Excel, albeit sometimes clumsy, can be a data analytics tool.

Try to solve the following question by using Excel:

Wine retailer, Porto, had 32 different promotion campaigns. You have the information on promotion month, minimum quantity to be purchased to benefit from promotions, discount percentages, varietals, wine’s origin, and whether the wine has passed its peak or not.

All this information is captured by a single Excel spreadsheet.

Then, you also have customer transaction data in a separate spreadsheet. You see that there had been 324 transactions completed.

Segment customers by using k-means clustering method. Use Excel to do so!

Making the hard decision of pricing easier: A blueprint comparing different pricing strategies

Pricing is an important decision involving both qualitative and quantitative considerations. 🧭

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From start-ups to strong incumbents, many companies still struggle to find the market clearing price-contrary to what you were taught in your microeconomics class, such a price does not exist in real life 😉

Given current inflationary environment and incessant decline in the purchasing power, this decision is now harder than it has ever been.

Whether your company follows a value-based, cost-based, or a hybrid pricing model, there are still some guidelines working in the pricing universe.

For example, you should know how to set relative prices for the following product pairs: razor and blades, video game hardware and software, printers and cartridges.

In this article, I lay out the fundamentals of different pricing strategies and which strategy makes sense for your company. Comparing different pricing strategies and the rationale behind, I also share examples of different pricing strategies from real-world companies and that particular pricing strategy is suitable for that specific company. The content can be utilized as a blueprint or guide concerning your efforts to determine the price of your services and products.

How too much reliance on sales promotions can upend long-established brands and companies: With lessons from video games industry

Designing a profitable sales promotion campaign is difficult, yet generally, sales promos make up big part of any company’s marketing budget.

You may think that even a poorly designed sales promo will lift your company’s gross revenues in the short-term, perhaps for a period of 2-3 months.

Having said that, a supposedly very well thought out, at least on paper, sales promotion can hurt your company’s both short- and long-term profitability, brand loyalty, and brand equity, as well as long-term overall gross revenues.

So, be careful with promotions; your company may have started its life as a differentiator but after so many promotions your company will become a commodity supplier that cannot command any price premium and dwindle, waging promotion and price wars.

I will briefly investigate and provide examples from my childhood heroes, namely Sega and Nintendo.

Marketing research done poorly!

Like many contemporary marketing concepts, marketing research is both an art and a science, containing many qualitative and quantitative aspects.

Star Wars and Friends would not have been created if its producers had listened to their “high-esteemed” marketing researchers.

Even for iPhone, many marketing researchers thought that the product would fail because consumers would still prefer to have their phones and MP3 players stand-alone.

Although these examples are of poorly conceived and conducted marketing research projects that still could not derail excellent products, there are still many successful products and services shaped by the insights gained through marketing research.

Success or failure of a marketing research project can be measured more easily, albeit in hindsight, if the product is launched.

For products that are scraped through marketing research, such measurement is more complicated: Obviously, you will never know if you never launch.

Think once what would have happened if George Lucas or Steve Jobs had listened to these “marketing researchers”!

Where did Apple get its inspiration to build its own D2C stores or allegedly even its sleek design policy? What about their marketing mix strategy?

Management Science Series #158: Solution to the ‘Understanding acquisitions costs, retention and churn rates (Nintendo example)’ 🧮

Understanding acquisitions costs, retention and churn rates 🧮

Nintendo has launched Nintendo Online membership program. The membership allows members to play additional retro Nintendo games, as well as store data. Subscribers are charged $10 per month and cost of maintaining this service is $2 per month per customer.

Nintendo expects the churn rate for this service to be 3%.

What is the maximum acquisition cost per customer?

Nintendo has a four-year time horizon for this new project so that the success of this project will be evaluated over a 4-year time period. Time value of money is not important and can be ignored.