Wednesday, December 26, 2012

Affinity analysis and urban legends

from theinsightaisle : Traditional market basket analysis tells us what is (i.e. correlation). To cite a classic, yet most likely an erroneous example, affinity analysis may find that on Thursdays and Fridays customers tend to buy diapers and beer together in a supermarket — i.e. young families stock up for the weekend. The main shortcoming of this information is that, beyond the conclusions that (a) the store should stock up on diapers and beer more heavily on certain days of the week and (b) both products should be placed close to each other in the store, there is little actionable information merchants and marketers can use to make smarter decisions. Affinity analysis tells us nothing about optimal pricing (e.g. should we discount diapers so that customers come in, buy discounted diapers but also grab a pack of beer with a healthy margin?), optimal promotional strategy (e.g. should we place diapers, beer or both in the ad?) or optimal merchandising tactics (e.g. which product should be placed on the endcap?).

from wikipedia: A common urban legend highlighting the unexpected insights that can be found involves a chain (often incorrectly given as Wal-Mart) discovering that beer and diapers were often purchased together, and responding to that by moving the beer closer to the diapers to drive sales; however, while the relationship seems to have been noted, it is unclear whether any action was taken to promote selling them together.

Cross-reference: Numbers-Atomic No. 30, Eikenberry

**Separately, from wikipedia on OODA:

The OODA loop has become an important concept in both business and military strategy. According to Boyd, decision-making occurs in a recurring cycle of observe-orient-decide-act. An entity (whether an individual or an organization) that can process this cycle quickly, observing and reacting to unfolding events more rapidly than an opponent, can thereby "get inside" the opponent's decision cycle and gain the advantage. Frans Osinga argues that Boyd's own views on the OODA loop are much deeper, richer, and more comprehensive than the common interpretation of the 'rapid OODA loop' idea.


Post a Comment

<< Home