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Friday, 26 February 2010

David Lloyd - SMS Marketing

In a previous Blog I mentioned about the letter I'd received from David Lloyd trying to get me back as a member of one of their gyms.

Since that letter I've also had a number of text messages from them, my 'favourite' of which is reproduced below as sent by them, (I've commented out the phone number) :

TREAT YOURSELF THIS PAYDAY WITH A MEMBERSHIP AT DAVID LLOYD! 1ST 20 RECIEVE A SPORTS BAG AND NO JOINING FEE. CALL 01582XXXXX T&Cs Apply. /2 REMOVE RPLY STOP

There are a number of issues I have with the message:

Capital letters - It feels like someone's shouting at me and also means the message looks like Spam.

If I was the kind of person who lived from payday to payday I wouldn't be considering forking out £60-£70 a month on gym membership.  I'd also consider it a pretty big financial commitment rather than a treat.

I stopped being a member over 3 years ago, it feels strange for them to start using SMS regularly out of the blue.  (I also had one text from them last October which did manage to user both upper and lower case and had a better promotion). 

In the last 3 weeks I've had 3 texts from them.  I know I could reply to stop them but I quite enjoy being outraged at wasted marketing like this.  Why don't they offer me a free day/week pass to see what I'm missing or offer me 3 months for the price of 2, anything must be more effective than a free sports bag.

Of course the main thing in any campaign is how effective it is, if David Lloyd have tried different message tone/content and a Cash4Gold style approach works best then fair play to them.  I'd be amazed though that it's the best way to get people coming back.

Dan Barnett


Director of Analytics

blog@analysismarketing.com

LinkedIn: http://www.linkedin.com/in/danjbarnett

Tuesday, 23 February 2010

Supermarket Pricing - Beware of Averages

On 13th Feb, the Guardian had a front page ‘special report’ on how Tesco and Asda had undertaken "...cynical and aggressive" price rises in the week before Christmas. The figures provided showed that for Tesco over 1,500 items had price increases between 9th and 22nd December with an average increase of 32p.

Tesco countered this by saying that they dropped the prices of 2,638 products with an average decrease of 54p over the same period (i.e., more products with prices dropped and a higher average price reduction).

Although both statements are factually correct they are both pretty much pointless, as an average (mean) is only really applicable if the data is not skewed. For the Tesco price rise data, the price rises are between 1p and £15.17, with a handful of items skewing the average:



Also, looking at the top 10 price rises it can be seen that 3 of them are for the same product (FIFA 10) on 3 different formats which, it could be argued, gives an unfair distortion of the figures.

If you were looking to show a lower level of average price rise you could just focus on Groceries rather than including non-foods where the absolute rise will be higher due to the generally higher item price.

It’s also likely, however, that Tesco’s price cut figures have a similar level of skew.

The other point to make is that the average in this case would only be valid in terms of the impact to the customer if all the items were sold in the same quantities. A penny on a pint of milk is likely to yield more profit that would be lost by knocking a pound off an obscure item.

The Guardian yesterday (22nd Feb) issued some new data around the supermarkets’ use of 1p discounts to promote a feeling of a ‘price war’ between supermarkets. The tone is that supermarkets are being ‘sneaky’ as the majority of price cuts (70% for Tesco) in the period 16-23 Dec 2009 were for just 1p when the typical price rise is higher.

The Guardian implies that when Tesco (and Asda) cut prices they cut them by a little amount and when they put them up they put them up by a greater amount so the consumer pays more overall. This implication is only valid if the overall comparative volume of sales from discounted and increased items results in a higher overall basket.

If customers buy 10 times the volume of an item discounted by 1p as an item increased by 5p then overall customers are better off than they were before the price changes.

With the huge range of products available it is easy for any supermarket to cherry-pick which prices it manipulates to look good in comparison to the competition. This should be taken for what it is, headline grabbing marketing, rather than each retailer cutting prices to the bone to give you, as the customer, the best deal possible.

All the noise in adverts about which retailer is the best probably cancels itself out so you are left with the same impression that you had as before of the main supermarkets. But none of the major supermarkets can risk not running similar campaigns for fear of customers believing the version of events its competitors run.

It would be interesting to see what this flurry of price cutting adverts has done to the extremes of the market – for example Aldi or Lidl at the lower end, Waitrose or M&S at the higher end.

Has the advertising of the big players made the low end seem irrelevant and the high end seem even more expensive by comparison? Or has the ‘price war’ lumped the main supermarkets in with the low cost brands and therefore created a distinction in quality for Waitrose and M&S?

The moral of the story is to make sure that you have access to the raw data behind any figures as, depending on which side of the fence you sit, you can ‘prove’ pretty much anything you want by defining the terms of the analysis and the metrics used.

Dan Barnett
Director of Analytics

blog@analysismarketing.com

LinkedIn: http://www.linkedin.com/in/danjbarnett

Sunday, 21 February 2010

Deal or No Deal - All Humanity Is Here

As a statistician, it’s fascinating to watch Deal or No Deal as it is a great example of game theory, mathematics, fear, greed and irrational thinking.

The contestant picks one of 22 boxes, which are valued between 1p and £250,000. The mean of these is £25,712.12 and the median is only £875 (the average of the £750 and £1,000 boxes). The huge difference between these figures shows how the few really big values skew the mean.

Detractors of the show don’t understand where the tension or excitement is in opening a random selection of boxes but the reality is that the game has something in common with poker in that the banker is trying to gauge the contestants appetite for risk by offering the smallest amount that they think will be enough to tempt the contestant to accept his offer to ‘buy’ their box.

The chart below shows the difference in the average box value of the contestant and what the contestant received , if nobody ever dealt and just took what was in their box, they’d be an average of almost £9k an episode better off.

With well over a thousand episodes that’s over £10m the banker has avoided paying out compared to if all contestants formed a collective, never dealt and shared their value in the box equally (although this would of course make for a terrible game show).

 
From a summary of outcomes of these episodes you can see that the player ‘wins’ more often than the banker (i.e., receives a greater amount than the value in the box) but that when the banker wins, he wins a greater amount.

This is because in situations where a contestant left with one small and one enormous sum of money for example the contestant will often deal at a value far below the mean of the two boxes for fear of going home with next to nothing.
 
Outcome Summary:
 






You might say all this is very well but what has this got to do with running a business? The first lesson is being able to differentiate between what is random and what is a trend, all too often people focus on the last few events and try to rationalise these rather than looking at the bigger picture. If there’s been a run of low value boxes then people think a high value is due when in reality every episode is an independent event.

It’s also a lesson in yield management in that the banker attempts to provide an offer that is sufficiently high to be acceptable but not as high as the true value (therefore the margin between these two figures can be considered as ‘profit’).

This can be applied in business by varying the level of offer for someone to join, return as a customer or upgrade a level as depending on their circumstances and affinity with your organisation they will need a different level of incentive to accept.

The more you know about a customer the more you can tailor your offer to get the person to deal at a price that’s right for you.


Dan Barnett
Director of Analytics

blog@analysismarketing.com

Note: Stats for this blog relate to activity from Series 2 to end of 2009 – raw data taken from http://www.dealornodeal.co.uk/backstage/stats/

Monday, 15 February 2010

David Lloyd - Offering Little

I received a direct mail piece last week from the David Lloyd chain of gyms attempting to regain me as a member. It’s been over 3 years since I left so they must be contacting pretty much everyone who used to have a membership.

With membership around £70 a month they can afford a scattergun approach as their mailing (with 25p mailing cost) doesn’t need a huge response rate for the campaign to pay its way.

Selling gym memberships is a rare example in business where almost all incremental sales revenue is incremental profit so with the sums involved you’d expect a professional approach.

The letter however (reproduced below), is an example of poor layout, bad grammar, omissions and garbled marketing:


Far too often companies treat ex-customers as a homogenous group without considering why the person left, how likely they are to come back and what incentive would be required to get them back.


Rather than concerning themselves with maximising the value of this pool of ex-customers, as long as a campaign is profitable no further questions are asked.

Dan Barnett,

Director
Analysis Marketing Ltd

blog@analysismarketing.com

Monday, 1 February 2010

The Chiltern Communications Group

Analysis Marketing are proud to be a member of the Chiltern Communications Group.

This is an alliance of independent marketing companies based in Beds, Bucks and Herts. Members hail from every marketing discipline, from copywriting to public relations.

The CCG run a lively networking event every month. At the last one I attended in Hemel Hempstead, we had an excellent talk by the very connected Steve Windsor about LinkedIn and a demonstration of origami as advertising from Michael Trew of Papershake!

If you'd like to know more about the CCG, please visit their website.

James White,
Analyst


Analysis Marketing Ltd
blog@analysismarketing.com