Working With Denominators: Getting mathematical, without getting too mathematical
The following pertains to the use of proportions for e-mail marketing strategies. How does changing the denominator in calculations change the analysis?
The table below (table 1) shows the proportions of purchases made over ALL states. That is, every percentage in this table is calculated by (# of purchases) / (Total # of ALL purchases). In other words, if we grabbed a random purchase out of ALL total purchases, then there is a 3.89% chance that the purchase grabbed was a CD bought by someone in New York. The sum of all values in this table equals 100%. Using this table, we can see that the top 2 states to market posters to are FL, and CO.
The next table (table 2) shows the proportions of purchases made within EACH state. That is, every percentage in this table is calculated by (# of purchases) / (Total # of purchases within each state). In other words, if we grabbed a random purchase made from the state GA, then there is a 49% chance that the purchase grabbed was for a TV. The sum of values in each column equals 100%. Using this table we can see that the top 2 states to market posters to are AL, and IL.
What’s the difference?
The difference between the two tables is that table 1 takes large amounts of purchases into account, while table 2 takes purchase choices into account. Both tables can yield beneficial results. By using only table 1, we would be including states with the largest amounts of poster purchases. By using only table 2, we would be including states which favor posters over other categories.
In this case, I would market posters to all four of the states. This way we have included our largest markets, and included states which favor posters more than any other sales category. The best markets will have high proportions in both tables. That is, they have large amounts of purchases and show significant leaning toward one sales category.
Knowing and utilizing the differences between the two tables can be very helpful in choosing top markets.