Gmid Associates

Are there really ‘right’ customers for a given product or service ? And if yes, what about the ‘right’ of the wrong customers to be targeted as well.

One of my friends started his career with a renowned analytics company. His first project was to find out the best customers from a pool of many physicians to be targeted for a newly launched drug. His first reaction was – “How mean! What about the doctors who will be left out?”. Notions like ‘Business exists for society’ and ‘Treat everyone as equals’ filled his mind at the time when he should be most concerned with running the regression equations. As he became sad, the urge to put his best in the work made him do some readings and meetings with wise people. That ultimately did dispel the dark clouds from his life and though he is now living happily (the ‘ever after’ way) with the regressions and correlations of the world, it was realized that many wanna-be statisticians in the business world face similar questions and thus remain stuck somewhere.

In an attempt to increase happy number crunching in the world, we dedicate this blog to our version of the big picture. Let’s start from the basics of the basic:

Business Analytics 101

1. Business occurs when a person (or animal involving at least one human being) is in need of some goods. Some other person (or plant/animal/an inanimate object involving at least one human being) produces the desired good. The two meet and the producer gives away the goods to the needy in exchange of some ‘money’ (referred from now as the Big M).
2. Money making is good- So long as the needs exist, producers will produce and thus will give the goods for:
   (a)  free as a noble gesture,
   (b)  free in the fear of getting killed/molested,  or
   (c)  the want of tons of the big Ms. However -
   - Not everyone will at all times be utmost noble so society cannot survive on case (a) alone.
   - The law will restrict case (b) to the minimum.
   - Hence, case (c) will always exist. As it is based on mutual consent so is not evil.
3. Money saving is good – Producers will always need raw materials to produce goods. These raw materials will require the M to get acquired. Furthermore, people involved in the production will be distributed some of these Ms to celebrate their contribution and to manage their greed that will erupt from time to time. So there will be fixed costs that producers will always have to incur. Besides, there will be uncertainity in the world which the producer only has to cope up with. As the wise man plans for the worst time, so the producer will want to have some of the Ms placed somewhere safe. Furthermore, because of need/greed more people will acquire skills to produce goods hence there will be competition. Competition will lead to innovation. Innovation will require hiring and tolerating bizarre people who want more Ms . Saving money is, thus, a good idea.
4. Cutting costs -  Less consumption is saving.  Saving money on people will make them unhappy which not only will increase unhappiness in the world but will also lose talent. In the new era, production costs are almost optimized so there is less room available (though analytics has done wonders here as well). Luckily there is one caveat – producers go to the customer and advertise. This consumes lots of Ms. Hence any money saved in this piece without losing on customers is a fantastic idea.
5. Right/Wrong Customers – As marketing is an en masse exercise, so fundamentally there will be people who will either:
   (a) use your product whatever happens , or
   (b) not use your product whatever happens, or
   (c) are confused and thus are most viable to marketing attempts.

   The wise producer will make category (a) happy , will not go to category (b), and will try to convince category (c). While right customers will come from categories (a) and (c), the category (b) will certainly be the wrong customers. Hence there is a big need to save the M in spending efforts on category (b) customers.

6. The art in Analytics - Some boys and girls have studied books on consumer psychology, statistics, and probability. They know that people repeat their behaviors even when they change.  They work hard and segregate (a)s, (b)s, and (c)s from the customer pool and study their past performances of buying goods on advertising attempts. They have also realized that (c) forms the largest group and there are sub-groups which exist within. They will strategize efforts to the right customers and will (i) cut costs and (ii) increase revenue.
7. Save the world – Money is saved, right customer is informed and she has got the goods, wrong customer is not troubled and the time is saved. Everyone is happier – the world is now a better place to be in.

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Appendix (The big M) – There is a field in data analytics that deals with charging the optimal price from the customers so that the overall profits are maximized. A quick count of the keyword ‘M’ in the article above will demonstrate possibilities of optimizing money transactions in a general business scenario. Now incorporate possibilities of vendors comparison, profit sharing, retention bonuses, cross-regional expenditures and currency conversion, open market, new technologies, etc. This will give a glimpse of different ways to optimize money.

- posted by Hemant Kathuria

This entry was posted on Tuesday, August 3rd, 2010 at 12:30 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.