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Market
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Business Intelligence
Tools & Resources
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SM Research CHAID Analysis Solution
Determining the relationships of variables
In some studies it is important to determine how a target variable (dependent) or outcome is explained by its relationship to other factors or variables. The model is useful in studies such as market penetration, predicting and interpreting responses and customer targeting or profiling. SM Research’s customized version of "CHAID Analysis" can determine how such relationships interact and illustrates the relationship in a "tree" diagram.
The SM Research CHAID Analysis for customer targeting
Recruiting new customers via direct contact (mail or phone) is a time consuming and costly effort. For most products/services, the hit rate is less than 1%. That means, in order to get a new customer over one hundred contacts are required.
By "mapping" the current customer list to the general population database (e.g., SM Research Residential Database of 11 million listed households), CHAID Analysis can find household clusters that have much higher incidence rates than the average population. By concentrating on these household clusters, the actual hit rate can be dramatically raised. The result is: Fewer phone calls or mail pieces with higher sales.
The CHAID Analytics Tree diagram
The above CHAID Analysis of a client's historical customer list is expressed in a tree diagram. As this diagram illustrates, some markets (population clusters) have good results while others are limited. In this case, 2.1 % or 109,000 individuals out of a total population of 5.1 million made a purchase in the Direct Marketing campaign. Geographic location was the most important factor. The suburban population had the highest response rate while the rural population had a very low one (0.3%).
Within the geographic areas, marital status of the population was the determinant in the suburban setting (5.3%) at more than double the average (2.1%), while income had the highest impact on sales (9.0%) at four times the average rate.
Although the campaign brought a low 2.1% average customer rate, the CHAID Analysis did find that some population clusters had much higher incidence rates. These results indicate that by concentrating on the clusters with these higher incidence rates, the actual hit rate will be much higher than if the general population was sampled. This approach will bring significant savings in the cost of acquiring new customers.
The CHAID Analysis advantage
CHAID Analysis is a truly efficient analytic tool that will utilize your current customer data to find high incidence leads and that can achieve great cost savings.
“SM Research played a major role in Yak's 200% sales growth by utilizing SMR's market research tools and analytics and providing extremely targeted Consumer and Business information that is second to none.”
-- Andrew Boone, VP of Marketing, Yak Communications
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