Data Mining
Which store lease will be the best choice?
One client's business model involved a high volume, low margin "grocery outlet," selling close-out merchandise at greatly reduced prices.
A key to success was the ability to slash location expense by negotiating a cheap lease on a "dark" store from a national grocery chain.
The business did very well for a time. However, the client subsequently leased two additional locations that turned out to be poor performers. What was there about the newer locations that wasn't working?
MAPS research provides a vital clue.
Using a combination of (a) the client's transaction sales data, (b) customer surveys and (c) market demographic data, MAPS built a model which predicted the sales volume of a variety of proposed locations.
The model showed that the low-performing store locations lacked the two most critical, but least visible, success factors.
As new locations became available, the model predicted which would succeed and which would not perform satisfactorily. The model paid for itself in just one profitable lease.
A quick glance at the chart shows the value of the data mining model.
- The Furston Bypass location should be avoided since it has the lowest 2010 sales forecast - only $853 per foot.
- The Bristol Avenue location is forecast to experience a decline in sales per foot.
- The St. Anna location seems to offer the most robust sales potential, $1638 per foot in 2010.
Market Share
CASE HISTORY: How can a bank's management understand what's happening in an office that is 50 miles from the home office?
The Wilmont office, our client bank, was not meeting the bank's performance goals. A market share project showed where the opportunities were being missed. Now that management knows the market is strong, they can create smarter strategies for growth.
Market Potential
Data derived from MAPS research makes clear that the market's growth has been principally in Money Market Deposit Accounts. Because of this, the client bank will struggle to produce growth if it focuses on Demand Accounts. See for yourself in the data chart provided.
The data clearly shows that the deposit market with the best growth is the MMDA & Savings account segment. On the other hand, a checking account conquest strategy does not appear to offer such good prospects.
Customer Satisfaction
One primary reason for cultivating loyal customers is that they are less price-sensitive and more tolerant of mistakes and missteps.
How do you find out how loyal your customers are? The only way is to ask them—using a statistically valid method—and then continuously monitor and measure the results over time.
Who has the most need for customer satisfaction research?
- Companies with branch offices that are removed from day-to-day central management oversight.
- Companies with thousands of customers spread over a large geographic area.
Banks, supermarkets and drugstore chains are good examples of companies that should always be monitoring customer satisfaction.
CASE HISTORY: Satisfied customers generate more profits and better relationships. Check the sample data from Wilgrove bank.
Keeping in mind that lower numbers are better scores, note the difference in satisfaction in the Weighted Performance Index scores between the Main Street office and the Corporate Center office. Also take note of the corresponding performance gap between cross sell (shown as Xsell) ratios in each office. In the banking world, these scores should be at least 1.50. While all of Wilgrove's offices have a long way to go, the most pressing need is to make improvements in the Corporate Center office. That office is greatly at risk of losing customers.
Competitor Research
Here's some MAPS research data that demonstrates missed profit opportunities--and a surprising lack of customer loyalty.
RAL Environmental discovered that, despite some generous pricing concessions, it was sharing many customers with competitors who charged more. Why is RAL Environmental losing business to competitors if their prices are much lower? How could any company ever know there was a negative skew to the pricing/business ratio without good research?
Business Plans
Here are the top three benefits of a written business plan and strategy:
- You will know in advance how to make critical business decisions quickly and accurately.
- You will get up every morning knowing exactly what you have to do today to be successful five years from now.
- You will understand reflexively and intuitively what's right and what's wrong for your business.
What do you think Trident Bank's growth strategy should be in the three-county market?
Marketing problems? Give us a call and tell us what you need. It's that simple.