April 26, 2009

Retail Testing: Matched Markets

You are a retail executive. Those folks in the online division talk all of the time about how they test different issues in real time. You don't have that type of flexibility.

Or do you?

Matched market testing has been around since, oh, I don't know, 1,200 BC? You take markets that have similar demographics, psychographics, lifestyle attributes, and customer spending levels at your brand, and you match them up for testing purposes.

Examples (there are infinite combinations):
  • Seattle and Portland
  • Los Angeles and San Diego
  • San Francisco and San Jose
  • Oakland and Sacramento
  • Phoenix and Denver
  • Minneapolis and Chicago
  • Detroit and Cleveland
  • Pittsburgh and Cincinnati
  • Philadelphia and Baltimore
  • Boston and Washington, DC.
  • Richmond and Raleigh
  • Atlanta and Miami
  • Tampa and Charlotte
  • Jacksonville and Orlando
  • New Orleans and Birmingham
  • Memphis and St. Louis
  • Nashville and Louisville
  • Omaha and Kansas City
  • Houston and Dallas
  • Salt Lake City and Boise
Once you match similar markets, you randomly assign one market to the test group, one to the holdout group. Then execute your test --- take 20% off orders over $75 in one set of markets, don't do so in the other set. Or test different price points --- you name it.

Matched markets. Give it a shot!