Tuesday, December 13, 2011

Duplication – A four part series

Part Two:  According to my calculations, the whole is equal to the sum of its parts.  Here’s how…

As a quick refresher, I’m going to continue using the hypothetical example presented in Part One of this series. 
Mid Atlantic Metro, with an adult population of 1,000,000 (ABCD), of which 610,000 (BC) said they bought from the Wal-Co store at least once in the last week, and 430,000 (CD) said they bought from Bull’s Eye in the last week.
See Exhibit 6 for a visual in our calculations.  The duplication calculations are rather simple, but you will need one of two different numbers to calculate the remaining parts. 

Exhibit 6 is simply a puzzle comprised of four separate pieces.  When all are put together, we have the full market or base (ABCD/all Mid Atlantic Metro adults in our case).  Each individual part represents something specific and multiple parts combined represent different things as well.  In this case, we have 15 different combinations that can be calculated and interpreted into a data point (See Exhibit 7 for a full list of combinations and descriptions).

Looking at the different parts through demographics, psychographics, geographic areas, spending habits, behaviors, trending or more can help to paint a strong picture of what separates truly loyal customers for each store and the traits of those customers they share (more on this in Part Three).

Most people are usually going to have access to at least ABCD (the market/base), BC (Store or product), and CD (another store/product).  The key to the remaining calculations is access to any of the remaining combinations.  The ones that usually come more easily are C or BCD.  Simply arithmetic helps us calculate the remaining values.  If we obtain C, to calculate B, we simply take BC and subtract C. To calculate D, we simply subtract C from CD.  To calculate A, subtract BCD from ABCD.  Then you have the ability to surmise any combination of the 15 metrics outlined in Exhibit 7.

If you obtain BCD, B= BCD-CD, D=BCD-BC, and then you can calculate the remaining factor, C (BCD-[B+D]).

Creating a Proportionate Venn Diagram:
For simplicity, I’m still using the same hypothetical data:
Circle 1 = ABCD = 1,000,000 (Diameter = 5)
Circle 2 = BC = 610,000
Circle 3 = CD = 430,000
Let’s say we are using a PowerPoint or Excel program to create the circles and use the diameter of 5 inches for the full market circle (ABCD).  To calculate the diameters for the two stores see Exhibit 8.

I’m still trying to come up with the formula for the accurate distance from the two center points of each circle for a proportionately accurate area of duplication.  In the meantime, a good guess should get the point across.

In Part Three, I’ll show multiple applications, analyses to consider and how it can impact strategy development and tracking.  In the final part of this series, I’ll show its application with three and even four different factors of overlap/duplication.  It’s not for the faint of heart, but when understood, it can have an even stronger application in analysis and strategy.