Managing Customer Heterogenity At Dentmax

Before you respond, read the descriptions of the variables DentMax collected data on (Table 2.6 on page 83 of the attached document) and the description of the clusters they identified (page 84 to 86).

For Full Credit, do the following: After reading the descriptions of the clusters, give each of the clusters a name. For example, you may label cluster 1 as Loyalists. Which of the four segments should DentMax prioritize in targeting based on (1) the potential profitability of that segment and (2) the alignment of that segments preferences with DentMaxs competitive strengths? Discuss one idea about how DentMax could position itself better for this segment. Please Elaborate

ALL CUSTOMERS DIFFER MURKETING PRINCIPLE A1: ALL CUSTONEAS DIFFER MUMAGIMG CUSTOMER HETEROGENETTY also be exhibiting their X-ray imaging products this year, as they always did. Since 35% of Table 2.6 describes all of the variables and their definitions. the dentists in the city visited DENTEXPO for at least one day of the three-day event, and Chicago was representative of the average market for DentMax's products, DentMax wished to capitalize on the opportunity offered by DENTEXPO to obtain a snapshot of the entire market. From the RFID-enabled technology, DentMax obtained the following variables for each of the show attendees (n=2,300) : - Time Spent at DentMax Booth captured by the minutes spent by each attendee at the DentMax booth - Time Spent at DentMed Booth captured by the minutes spent by each attendee at the DentMed booth - Time Spent at OxyMax Booth captured by the minutes spent by each attendee at the OxyMax booth. Second, DentMax collected the first and last name of each dentist, and their dental practice location for the subsample of DENTEXPO dentists that visited its booth. It matched these details up with its own sales database, to obtain the sales records of the dentists who visited its booth. From this, it determined whether a dentist who visited its booth had purchased from them in the past, and if so, how much they had purchased. DentMax collected the following variables: - \% Buying from DentMax in the past, coded as 1 if the dentist has ever bought from DentMax, 0 otherwise - Historical Sales Index, coded as a scaled number from 0 to 100 , where 100 represents the largest sales in dollars - Sales frequency, coded as the yearly number of orders from DentMax - Length of Relationship, coded as 2020 - earliest transacted year - Number of Referrals, coded as the total number of times the dentist provided a key referral for another sale. Third, using the first and last name of the dentist from the subsample of DENTEXPO dentists who visited its booth, DentMax surveyed the dentists one week after the show. In the survey, it obtained answers to the following questions about the dentists. For each of the questions, 1 was scored as the lowest, 7 was the highest. The questions were as follows: - Importance of Image Quality - Trust in TVAds - Importance of Diagnostic Flexibility - Trust in Radio Ads - Importance of Software integration - Trust in Internet Ads - Importance of Technical Assistance - Trust in Dental Magazine Ads - Importance of Price - Trust in Peers Source: Getty Images/Jordan Siemens ALL CUSTOMERS DIFFER MURKEING PRINCIPLE A1: ALL CUSTONERS DIFFER MIMAGIMG CUSTOMER HETEROGEMEITY Tahla 77 fluctar Analucic Raculte INDUSTRY SEGMENTATION EXERCISE The first question that DentMax sought to answer through the data was: "How to effectively segment the market for dental X-ray intraoral sensors, based on the differing needs of dentists?" Cluster Analysis Overview DentMax used cluster analysis to perform an industry segmentation, that is, it tried to identify underlying subsamples of dentists who are homogeneous in their behaviors and preferences and markedly different from other subsamples. Use the dataset "DENTAMX Case Data file.xlsm" to perform cluster analysis. The SAS (DENTMAX Case SAS Code.SAS) and the R (DENTMAX Case Output R Code R ) output file can be obtained to see the results presented. The results of the cluster analysis are described as follows. Number of Clusters The first task is to decide the number of clusters. The model first considers each customer as a separate segment. Subsequently, it finds the two segments/customers that, if grouped together, would lead to the lowest loss of information. The model continues to merge segments/customers until such merging would lead to an unacceptable loss of information. The Elbow curve in Figure 2.13 represents the loss of information for every cluster. After four clusters, there is not much loss of information. Therefore, four is the optimal number of clusters. ALL CUSTOMERS DIFFER between dentists in Cluster 2 and DentMax was 8.8 years on average, indicating that they were also strong and loyal. Tuming to the survey results, dentists in Cluster 2 highly valued image quality (6.01), software integration (6.23), and, perhaps, price (6) but only moderately valued diagnostic flexibility (5.48) and technical assistance (5.97). Like Cluster 1 dentists, these dentists also appeared to trust dental magazine ads (5.99) and peer feedback (6.97) more than TV (4.76) and radio (4.76), but unlike those in Cluster 1, they trusted the Internet highly (6.01) for product information. Based on the strong sales records, fit with DentMax's positioning in the marketplace, but revealed information about time spent at competitors' booths, DentMax named this cluster Dentists who comprised the largest cluster, Cluster 3 (49\%), spent 150 minutes on the trade show floor, but only spent 8% of their time in DentMax's booth ( 12 minutes), and 14% of their time at the competitors' booths (21 minutes). Thus, these dentists appear to be favorable to neither DentMax nor its competitors. Observing their sales records revealed that only 32% of the dentists in Cluster 3 had purchased from DentMax in the past, the historical sales index for these dentists was moderate (21), and so was their sales frequency (3.01). Moreover, the relationship between dentists in Cluster 3 and DentMax was only 4.07 years on average, indicating that they were not very loyal or strong customers. Turning to the survey results, dentists in Cluster 3 highly valued technical assistance (6.07) and price (6.9), but not image quality (5), software integration (4.99), or diagnostic flexibility (5.02). Like Cluster 1 dentists, these dentists also appeared to trust dental magazine ads (5.25) and peer feedback (5.77), but notTV (4.75), radio (4.48), or the Internet (3.99) for product information. Based on the lukewarm sales records, moderate fit with DentMax's positioning in the marketplace, but revealed information about time spent at the booths, DentMax named this cluster Dentists who comprised the last cluster, Cluster 4 (17\%), spent only 60 minutes on the trade show floor, spending 10\% of their time in DentMax's booth (6 minutes) and 18% of their time at the competitors' booths (11 minutes). Thus, these dentists appear to be favorable to neither DentMax nor its competitors. Observing their sales records revealed that only 6% of all the dentists in Cluster 4 had purchased from DentMax in the past, the historical sales index for these dentists was poor (9.02), and so was their sales frequency (0.99). Turning to the survey results, dentists in Cluster 4 highly valued technical assistance (6.98) and price (7), but did not value image quality (3.98), software integration (4.01), or diagnostic flexibility (3.99). Cluster 4 dentists only appeared to trust peer feedback (5.06) for product information. Based on the poor sales records, low fit with DentMax's positioning in the marketplace, and revealed information about time spent at the booths, DentMax named this cluster TARGETING AND POSITIONING FOR COMPETITIVE ADVANTAGE After segmenting potential customers into homogeneous groups on the basis of their trade show booth behaviors, past purchase behaviors, and product preferences, DentMax needed to select which current segments to retain, and which new segments to potentially target. DentMax used two broad criteria to target each of the four market segments. First, it assessed the market attractiveness of each segment, that is, whether the segment appeared strategically and financially valuable to serve, based on dentists' past purchase data. Second, it considered the competitive strength of each segment, which represented the relative strength of DentMax versus its competitors, at securing and maintaining market share in a given segment. Based on these two broad criteria, it assessed the value of each segment. ALL CUSTOMERS DIFFER MURKETING PRINCIPLE A1: ALL CUSTONEAS DIFFER MUMAGIMG CUSTOMER HETEROGENETTY also be exhibiting their X-ray imaging products this year, as they always did. Since 35% of Table 2.6 describes all of the variables and their definitions. the dentists in the city visited DENTEXPO for at least one day of the three-day event, and Chicago was representative of the average market for DentMax's products, DentMax wished to capitalize on the opportunity offered by DENTEXPO to obtain a snapshot of the entire market. From the RFID-enabled technology, DentMax obtained the following variables for each of the show attendees (n=2,300) : - Time Spent at DentMax Booth captured by the minutes spent by each attendee at the DentMax booth - Time Spent at DentMed Booth captured by the minutes spent by each attendee at the DentMed booth - Time Spent at OxyMax Booth captured by the minutes spent by each attendee at the OxyMax booth. Second, DentMax collected the first and last name of each dentist, and their dental practice location for the subsample of DENTEXPO dentists that visited its booth. It matched these details up with its own sales database, to obtain the sales records of the dentists who visited its booth. From this, it determined whether a dentist who visited its booth had purchased from them in the past, and if so, how much they had purchased. DentMax collected the following variables: - \% Buying from DentMax in the past, coded as 1 if the dentist has ever bought from DentMax, 0 otherwise - Historical Sales Index, coded as a scaled number from 0 to 100 , where 100 represents the largest sales in dollars - Sales frequency, coded as the yearly number of orders from DentMax - Length of Relationship, coded as 2020 - earliest transacted year - Number of Referrals, coded as the total number of times the dentist provided a key referral for another sale. Third, using the first and last name of the dentist from the subsample of DENTEXPO dentists who visited its booth, DentMax surveyed the dentists one week after the show. In the survey, it obtained answers to the following questions about the dentists. For each of the questions, 1 was scored as the lowest, 7 was the highest. The questions were as follows: - Importance of Image Quality - Trust in TVAds - Importance of Diagnostic Flexibility - Trust in Radio Ads - Importance of Software integration - Trust in Internet Ads - Importance of Technical Assistance - Trust in Dental Magazine Ads - Importance of Price - Trust in Peers Source: Getty Images/Jordan Siemens ALL CUSTOMERS DIFFER MURKEING PRINCIPLE A1: ALL CUSTONERS DIFFER MIMAGIMG CUSTOMER HETEROGEMEITY Tahla 77 fluctar Analucic Raculte INDUSTRY SEGMENTATION EXERCISE The first question that DentMax sought to answer through the data was: "How to effectively segment the market for dental X-ray intraoral sensors, based on the differing needs of dentists?" Cluster Analysis Overview DentMax used cluster analysis to perform an industry segmentation, that is, it tried to identify underlying subsamples of dentists who are homogeneous in their behaviors and preferences and markedly different from other subsamples. Use the dataset "DENTAMX Case Data file.xlsm" to perform cluster analysis. The SAS (DENTMAX Case SAS Code.SAS) and the R (DENTMAX Case Output R Code R ) output file can be obtained to see the results presented. The results of the cluster analysis are described as follows. Number of Clusters The first task is to decide the number of clusters. The model first considers each customer as a separate segment. Subsequently, it finds the two segments/customers that, if grouped together, would lead to the lowest loss of information. The model continues to merge segments/customers until such merging would lead to an unacceptable loss of information. The Elbow curve in Figure 2.13 represents the loss of information for every cluster. After four clusters, there is not much loss of information. Therefore, four is the optimal number of clusters. ALL CUSTOMERS DIFFER between dentists in Cluster 2 and DentMax was 8.8 years on average, indicating that they were also strong and loyal. Tuming to the survey results, dentists in Cluster 2 highly valued image quality (6.01), software integration (6.23), and, perhaps, price (6) but only moderately valued diagnostic flexibility (5.48) and technical assistance (5.97). Like Cluster 1 dentists, these dentists also appeared to trust dental magazine ads (5.99) and peer feedback (6.97) more than TV (4.76) and radio (4.76), but unlike those in Cluster 1, they trusted the Internet highly (6.01) for product information. Based on the strong sales records, fit with DentMax's positioning in the marketplace, but revealed information about time spent at competitors' booths, DentMax named this cluster Dentists who comprised the largest cluster, Cluster 3 (49\%), spent 150 minutes on the trade show floor, but only spent 8% of their time in DentMax's booth ( 12 minutes), and 14% of their time at the competitors' booths (21 minutes). Thus, these dentists appear to be favorable to neither DentMax nor its competitors. Observing their sales records revealed that only 32% of the dentists in Cluster 3 had purchased from DentMax in the past, the historical sales index for these dentists was moderate (21), and so was their sales frequency (3.01). Moreover, the relationship between dentists in Cluster 3 and DentMax was only 4.07 years on average, indicating that they were not very loyal or strong customers. Turning to the survey results, dentists in Cluster 3 highly valued technical assistance (6.07) and price (6.9), but not image quality (5), software integration (4.99), or diagnostic flexibility (5.02). Like Cluster 1 dentists, these dentists also appeared to trust dental magazine ads (5.25) and peer feedback (5.77), but notTV (4.75), radio (4.48), or the Internet (3.99) for product information. Based on the lukewarm sales records, moderate fit with DentMax's positioning in the marketplace, but revealed information about time spent at the booths, DentMax named this cluster Dentists who comprised the last cluster, Cluster 4 (17\%), spent only 60 minutes on the trade show floor, spending 10\% of their time in DentMax's booth (6 minutes) and 18% of their time at the competitors' booths (11 minutes). Thus, these dentists appear to be favorable to neither DentMax nor its competitors. Observing their sales records revealed that only 6% of all the dentists in Cluster 4 had purchased from DentMax in the past, the historical sales index for these dentists was poor (9.02), and so was their sales frequency (0.99). Turning to the survey results, dentists in Cluster 4 highly valued technical assistance (6.98) and price (7), but did not value image quality (3.98), software integration (4.01), or diagnostic flexibility (3.99). Cluster 4 dentists only appeared to trust peer feedback (5.06) for product information. Based on the poor sales records, low fit with DentMax's positioning in the marketplace, and revealed information about time spent at the booths, DentMax named this cluster TARGETING AND POSITIONING FOR COMPETITIVE ADVANTAGE After segmenting potential customers into homogeneous groups on the basis of their trade show booth behaviors, past purchase behaviors, and product preferences, DentMax needed to select which current segments to retain, and which new segments to potentially target. DentMax used two broad criteria to target each of the four market segments. First, it assessed the market attractiveness of each segment, that is, whether the segment appeared strategically and financially valuable to serve, based on dentists' past purchase data. Second, it considered the competitive strength of each segment, which represented the relative strength of DentMax versus its competitors, at securing and maintaining market share in a given segment. Based on these two broad criteria, it assessed the value of each segment