Acertiva. Market Research. Bi-monthly Newsletter. June 2007

MARKET RESEARCH: When discriminating is useful

Even though discrimination is widely regarded as politically incorrect, in the business world discrimination is a usual practice that helps companies to be more efficient in the marketplace. For example, banks and insurers perform routine evaluations to determine the risk of the people who request their services. Sales managers develop and use pointing systems to evaluate their prospective clients.

Although the concept of classifying customers and prospects seems to be simple and useful, some critical questions arise about how to implement such analysis. Which are the more relevant classification criteria? What should be the classification criteria? To answer those questions, there is one statistical tool known as discriminant analysis. Such technique is used to classify individuals in two or more alternative groups based on several parameters. Discriminant analysis can also be used to identify which variables are the most relevant for classifying individuals into different groups. Once the statistical analysis has been performed, it is possible to obtain a mathematical model that will help to assign a score to each individual and to determine, based on that score, to which group the individual belongs.

One of the main challenges that analysts face when preparing for a statistical analysis is to determine their sources of information. To solve that problem, analysts usually refer to the expertise of salespeople, to accounting and sales records, and to market research findings.

Finally, as a warning, it is important to be aware about the potential shortcomings and errors that can occur while performing a statistical analysis (i.e. variable correlation, size group differences, etc.). It is also important to know that discriminant analysis assumes that the groups have been defined prior to the analysis and it does not consider any changes that might occur in the business environment. Once the potential shortcomings mentioned before have been considered by the analyst, it is good to insist that discriminant analysis is indeed a very powerful tool for efficiently classifying clients and prospects.

LATIN AMERICA: Baby boomers move to the south of Río Grande

It is not a secret that world population is ageing at a very fast pace. Particularly, in the

United States

it is expected that as the baby boomer generation (those people born between 1946 and 1964) starts retiring, they could have a significant impact in the world economy. It is not a minor issue. According to America ’s Census Bureau, the baby boomer generation comprises almost 82 million human beings who will look for the best options for spending their golden years, and of course, their retirement savings. Baby boomers will be looking for the best care, entertainment, personal care, after-retirement jobs, etc.

Latin American countries are quite attractive to many American and Canadian retirees because of their relatively cheap costs of living, nice weather, and closeness to their home countries. Actually, some countries in the region, such as Panama , Honduras , Belize and Nicaragua already offer attractive tax incentives and discounts in healthcare services to senior citizens who choose to retire in their countries.

Even though the phenomenon has just started, the main challenge local firms and governments of the Latin American region will face is how to prepare and profit from the huge opportunity that represents the new wave of retiring baby boomers.