How submit your report and the format of the report is explained in the file: MNGT130 Submission and Format Guide.docx on Moodle.
Board Game Boutique is an online retail business that sells board and card games. The business is run by two entrepreneurs, Alison and Toby. In the three years that they have been trading they have gained a good reputation and good reviews by competitive pricing, speedy deliveries and responsive customer service. However, tabletop gaming is challenging area to break into and there are many established companies both large and small. The business made a small loss in the first two years and a small profit last year. They sell all their games online direct from their website and they have a good website. Most of their customers find the website by recommendations from friends, or from watching their impartial, and often amusing, game reviews.
A friend doing a marketing degree suggested that they try some advertising to increase sales. They have been experimenting with some online advertising (Google, Facebook, etc). The type of advertising that they are using is “Pay per click” advertising. With this type of advertising they only pay when someone clicks on the advert (there is no payment for displaying the advert). When someone clicks on the advert they are redirected to the Board Game Boutique website. Hopefully the person will then make a purchase.
With this type of advertising Alison and Toby specify how much they will pay for each click (i.e., the cost per click). The more they decide to pay the more prominently the advert is featured (e.g., a better location or on a more popular page). This results in obtaining more clicks. Alison and Toby have experimented over the last 30 days with different payment amounts. The accompanying spreadsheet shows for each day the cost per click and the number of clicks the website received.
In general, the cost per click varies in different market segments depending on the level of competition between companies. Alison and Toby have found that they must use quite a high cost per click amount to get plenty of clicks because they are competing with other online stores. Hence the cost per click amounts in the spreadsheet are quite high.
Alison and Toby have also tracked how many of the people who clicked on the advert then made a purchase and so became a new customer. They found that this was about 2% on average. Research that they have done tells them that this is typical for retail companies in their sector. This is called the conversion rate. They know from experience that some new customers will buy once, and some new customers will make several purchases. On rare occasions a customer will buy an item but will then return it. On average they estimate that a new customer is worth about £40 in total profit to the business (taking account of all purchases, returns of goods etc.). This does not include the cost of acquiring the customer – i.e., it does not include the cost of the pay per click advertising.
Alison and Toby are not sure if the online pay per click advertising is worthwhile. If they do use it they are not sure how much to pay for each click. They just want to consider amounts between 15p and £1. This is because they think that they will get very few clicks if they pay less than 15p. If they pay more than £1 they think that they will not get many more clicks than the amount that they would get with £1. The system allows them to pay any amount in whole pence. However, to make things simpler they just want to consider multiples of 5p (i.e., paying 15p, 20p, 25p, etc.). Their initial aim was to get about 200 clicks per day and, based on their experiments, they are planning to pay 75p per click. However, they are not sure whether this is the right approach. Their accountant is always telling them to focus on profit and so perhaps they should choose the pay per click amount that gives the highest profit per day. They know that the data in the spreadsheet should be useful but they are not sure how to use it.
A marketing company have offered to manage Alison and Toby’s online advertising. The service they provide includes targeting the advertising better using the online advertising options provided by Google, Facebook, etc., so that the advertising is only shown to the most relevant types of people.
The marketing company will also improve the advert content with different adverts being shown to different people related to that person’s characteristics and what they are searching for. They will also manage and make improvements to the Board Game Boutique website with specific landing pages. The marketing company say that the number of clicks for a given cost per click is likely to stay about the same. However, they say that the benefit of their service is that it will increase the conversion rate towards 3%. Alison and Toby will still need to tell the marketing company how much they are prepared to pay for each click. The cost of using the marketing company would be £1000 per month.
Alison and Toby know that you have expertise from your university course in analysing data. Based on the information provided above and in the spreadsheet, they would like advice on whether to use pay per click advertising, how much to pay if they do use it, and whether to use the marketing company to manage the advertising.
Use the information above and in the spreadsheet to advise Alison and Toby on what to do. Use any methods from the MNGT130 course that you think are useful and appropriate. However, you will not get any credit and may lose marks if you use methods that are not suitable.
You can assume that Alison and Toby are familiar with all the statistics that have been covered in the course and so you do not need to explain any statistical terminology that you use.
Write a report for Alison and Toby that clearly explains the analysis you have done and advises Alison and Toby on the best action to take. Your report should include the following:
An analysis of the relationship between the cost per click and the number of clicks (20% of marks)
If they do not use the marketing company, what cost per click should Alison and Toby use? Show all your analysis and explain the reasons for your answer. Include comments on whether 75p per click is a good option to use. (20% of marks)
If they do use the marketing company, what cost per click should Alison and Toby use? Show all your analysis and explain the reasons for your answer. Is it beneficial to use the marketing company? (20% of marks)
Based on your analysis, recommend the best action for Alison and Toby to take. Discuss any factors or other information that they should consider. (20% of marks)
20% of marks will be allocated to the presentation of the report (the format and layout of the report, the clarity of the writing etc).
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