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Before advancing through any of the data, I just want to set up the problem. So in this case micro-marketing refers to the customization of prices, promotion, assortment in service to the store level rather than adopting uniform marketing policies for all stores. Now, what that means, is basically moving from these individual mom and pop operations to large chains of stores. And now what's happening is that people are interested in going back and customizing these strategies at a very local level.
The first example is Target. Target is similar to Wal-Mart in that it sells a large assortment of department type goods. They've got stores located throughout the United States and want to go back and think about "well, what types of products should we carry in each of our stores?" So one example that's going to sound quite obvious to people is that they went back, thought about micro-marketing, and found out that they shouldn't be selling parkas in their Florida stores. So, in this case, the micro-marketing application is going back and customizing the assortment of products. Some stores will carry this product and other stores won't. And the contrast will be to say ``well, let's carry the exact same products in all the stores.''
The next example is Ames Department stores. What they need to decide is what products do they want to promote and advertise in different regions of their northeastern United States stores. In this case they had the same promotions in Boston as they do in Pennsylvania. Now again, you can think that everyone would be interested in the same types of products, so maybe they should go out and advertise to everybody or, probably a more interesting thing for them is to try and go back and look at the characteristics of the market and say, ``well, people have different interests in different types of goods and we want to get information out to the people that it's going to be more useful and beneficial to.''
What I'm really going to concentrate on is this final example. So Dominic's is a major supermarket grocery chain in the Chicago area. They've got about a quarter of the market share. If you're familiar with Chicago, you know the major competitor is Jewell Food Stores. What Dominic's would like to do is customize it's pricing policies to reflect neighborhood differences. So, why would you want to do this? Well, imagine that you've got a store that's located in the inner-side or the south side of Chicago. Would you want to have the exact same set of pricing strategies that you would have for a store that's located in a very wealthy or posh suburb?
In this case, what it really amounts to is, let's go back and think about what are the factors that are determining demand. First we've got to think about what is demand. What influences how much people are going to buy of my product. And after we've looked at that problem what's the implications of measuring these differences on our pricing strategies. Now, specifically, the data set that I'll be using is the refrigerated orange juice market. It's a much smaller problem than thinking about everything that the store is going to do, but you can see that the reason that I want to do this is just the magnitude of the pricing problem.